In an interview with the Financial Times, Gita Gopinath, the deputy head of the International Monetary Fund (IMF), said that inflation in the US has not abated sufficiently to allow the Federal Reserve to abandon its restrictive monetary policy.

Gopinath noted it is “important” that the US Federal Reserve “stay the course” in its efforts to lower prices, at least until there was a “very definite, durable decline in inflation” across sectors beyond the volatile food and energy sectors.

She said, “If you see the indicators in the labor market and if you look at very sticky components of inflation like services inflation, I think it’s clear that we haven’t turned the corner yet on inflation.” She added there was only a very narrow path for the country to avoid a recession in the coming months.

Gopinath’s remarks came as recent figures have shown that US inflation readings have begun to subside in the past few months, and analysts have begun to suggest the rising prices in the US may have peaked. From October to November, the rate of price rises declined from 7.7% to 7.1%, according to US Labor Department data.

The Fed last raised the key interest rate 50 basis points on December 14th, bringing the key rate up to 4.25-4.5%. Gopinath noted the central bank may need to raise rates to roughly 5%, and maintain it there for the rest of the year to contain any further price increases.

She added, “It’s another challenging year for monetary policy, but it’s a different kind of challenge. The last year was about quickly tightening monetary policy and how far to go. Now for lots of countries, the question is how long to stay on hold.”

Gopinath noted Europe may take longer than the US to get control of price increases, noting, “we are looking well into 2024 before we start seeing inflation coming closer to the ECB’s [2%] target.”