Georgieva highlighted that acting too soon poses a greater risk to the global economy than responding slightly late to economic indicators.

With central banks like the US Federal Reserve and the European Central Bank (ECB) considering adjustments to address post-pandemic inflation, attention has shifted to the timing of rate cuts and their potential impact on investment and economic growth.

“Our team has looked back in history, and the conclusion they drew is that the risk of premature easing is higher than the risk of being slightly behind,” Georgieva told reporters during a briefing at the International Monetary Fund in Washington.

“But don’t keep it tight if you don’t have to,” she said. “So look at the data, act on the data.”

Georgieva emphasized the importance of data-driven decisions, urging policymakers to closely monitor economic indicators before implementing changes to interest rates.

Her cautionary remarks come in the wake of the US Federal Reserve’s decision to maintain interest rates steady, despite speculation about a potential rate cut in March.

Fed Chair Jerome Powell downplayed expectations of an imminent rate reduction, citing the need for further confidence in economic data.

“I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to cut,” he told reporters on Wednesday.

Similarly, the European Central Bank (ECB) President Christine Lagarde hinted at future rate cuts without committing to a specific timeline, underscoring the complexity of navigating monetary policy amid evolving economic conditions.

Georgieva acknowledged the challenges facing policymakers in achieving a delicate balance between addressing inflation concerns and stimulating economic activity.

Despite expressing optimism about the United States nearing a “soft landing” in managing inflation, Georgieva cautioned that uncertainties persist, emphasizing the need for prudent monetary policy measures.