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World Bank president on Fed’s inflation fight: Central banks have more tools than rate hikes

World Bank President David Malpass said Friday that the “key” factor to fighting inflation is focusing on global production as Federal Reserve Chair Jerome Powell delivered a stark message on taking forceful action to restore price stability.

“There needs to be a lot more production that’s deployed into sectors that actually make what people need, especially lower-income people,” Malpass told Neil Cavuto on “Cavuto: Coast to Coast.”

Speaking at the Kansas Federal Reserve’s Jackson Hole symposium, Powell predicted the Fed will add more rate hikes on top of the four passed earlier this year, warning of economic “pain” for Americans.While Powell continues to wager with rate hikes, Malpass encouraged nations to engage in more production and make more capital available to small businesses as a means to combat inflation.

“You can’t have governments allocating capital,” he said. “They’re not very good at that.”

“And at some point, you have to allow businesses to do it so that they can really produce for everybody around the world.”Malpass also acknowledged the benefit of subsidies for developing countries but warned they should be “targeted” at low-income communities, especially in more advanced economies.

“The political tendency is to give it to everybody,” he said.

Malpass concluded that inflation is a “threat that has to be dealt with” and stressed a need for more flow of capital to “productive things around the world” instead of the rich.

“The central banks have more tools than just the rate hikes… capitalizing things that are already over-overcapitalized, that is the core of the problem,” he said.

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