In the recent inflation news, the IMF’s global economic outlook highlights the prevalence of stubborn inflation, necessitating sustained efforts to bring it under control.
The International Monetary Fund (IMF) has increased its global inflation projection for the upcoming year.
Additionally, the IMF urges central banks to maintain a stringent monetary policy stance until sustained relief from inflationary pressures is observed.
In its latest World Economic Outlook report released Tuesday, the International Monetary Fund (IMF) raised its global inflation forecast.
The IMF anticipates a 5.8 percent increase in consumer prices worldwide for the upcoming year.
This revision marks an increase from the 5.2 percent figure projected just three months ago, remarks the stubborn inflation.
Besides the inflation news, the IMF has concurrently reduced its economic growth forecast for 2024 amid its heightened concern about inflation.
The IMF, tasked with overseeing the global economy, projects that stubborn inflation will persist above central bank targets in most countries. This outlook extends until the year 2025.
Stubborn Inflation: Highlights from IMF-World Bank meetings
These highly awaited inflation news and forecasts are a focal point of the annual IMF-World Bank meetings. Notably, this year’s meetings are being held in Marrakech, Morocco, marking the first time they’ve been hosted in Africa in half a century.
The event occurred following a recent deadly assault on Israel by Hamas over the weekend, which reverberated globally and rekindled concerns of a broader Middle East conflict. This region houses nearly a third of the world’s oil supply.
These attacks add another layer of complexity to an era characterized by global uncertainty.
Central banks in major economies, such as the United States and the European Union, have embarked on a robust series of interest rate hikes spanning over a year.
This concerted effort aims to quell the stubborn inflation, which surged to a global rate of 8.7 percent in 2022, the highest recorded since the mid-1990s.
Tight monetary policies urged to combat stubborn inflation
In a press briefing, Pierre-Olivier Gourinchas, the IMF’s chief economist, emphasized the necessity of maintaining tight monetary policies.
Tightening is needed in most regions until a sustained decline in inflation towards target levels is observed. Gourinchas stated, “We’re not quite there,” underlining the ongoing inflationary challenges. His remarks underscored the IMF’s stance on the matter.
Several factors, including disruptions in global supply chains due to the COVID-19 pandemic, drove the stubborn inflation.
Additionally, fiscal stimulus measures were implemented in response to the global lockdown, contributing to heightened demand.
Stubborn inflation and growth outlook
In the United States, a tight labor market further fueled stubborn inflation pressures.
Furthermore, the conflict between Russia and Ukraine disrupted food and energy supplies, particularly impacting Europe and the UK. As a result of these factors, global inflation reached its highest levels.
Looking ahead, the IMF projects a global growth rate of 2.9 percent for the next year, a slight reduction of 0.1 percent from its July forecast.
This figure falls below the pre-pandemic two-decade average of 3.8 percent. However, the forecast for 2023 remains unchanged at 3 percent.
Global economic landscape: Inflation news, growth, and challenges
China’s growth forecast lowered to 5% for 2023 and 4.2% for 2024 due to real estate investment declines and weak consumer sentiment.
Euro area growth estimate also reduced to 0.7% in 2023 and 1.2% in 2024. Germany contracts more than expected, while France improves.
Japan’s growth forecast boosted to 2% this year due to pent-up demand and export rebound. UK growth outlook for 2024 reduced to 0.6% due to inflation control.
IMF warns of global economic fragmentation amid US-China tensions and Russia’s aggression. Trade growth at 0.9% this year, down from 2% in July, due to shifts in services and trade barriers.
Inflation news remains a pivotal topic in discussions about the world economy.
Since April, the IMF has consistently expressed concerns about the weakening medium-term prospects for the global economy.
The IMF also anticipates the US unemployment rate to peak at 4 percent by the final quarter of 2024, lower than the 5.2 percent forecast in April.
This projection aligns with expectations of a milder economic slowdown in the United States than previously anticipated.
These concerns about stubborn inflation stem from various factors, including the ongoing repercussions of the pandemic, the Ukraine conflict, the fragmentation of the world economy into distinct blocs, and the tightening of central bank policies.
Pierre-Olivier Gourinchas, the IMF’s chief economist, characterizes the current global economic state as one of gradual recovery, stating, “We see a global economy that is limping along, and it’s not quite sprinting yet.” This assessment comes against the backdrop of lingering worries regarding inflation news.
While global growth prospects remain modest, they are relatively stable. The IMF holds optimism that central banks can rein in the stubborn inflation without triggering a worldwide recession.
However, beneath the overall stable projection in stubborn inflation news, significant shifts are occurring in individual country forecasts for global growth. For instance, the United States, the world’s largest economy, has seen its 2022 projection raised to 2.1 percent from 1.8 percent in July.
Additionally, next year’s estimate has increased to 1.5 percent from 1 percent, attributed to more robust business investment in the second quarter and resilient consumption growth.
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