IMF's view: The global fight against high inflation is 'almost won'
Updated 8:43 PM GMT+5, October 22, 2024
The global war against inflation has largely been won — and at surprisingly little cost to economic growth, the International Monetary Fund has declared.
WASHINGTON (AP) — The global war against inflation has largely been won — and at surprisingly little cost to economic growth, the International Monetary Fund declared Tuesday.
In its latest assessment of the global economy, the IMF predicted that worldwide inflation will cool from 6.7% last year to 5.8% this year and to 4.3% in 2025. It estimates that inflation will fall even faster in the world’s wealthy countries, from 4.6% last year to 2.6% this year and 2% — the target range for most major central banks — in 2025.
The slowdown in inflation, after years of crushing price increases in the aftermath of the pandemic, led the Federal Reserve and the European Central Bank to cut interest rates this year after they had aggressively raised them to try to tame inflation.
“The battle against inflation is almost won,″ Pierre-Olivier Gourinchas, the IMF’s chief economist, told reporters Tuesday. ”In most countries, inflation is hovering close to central bank targets.″
Inflation had accelerated when the world economy recovered with unexpected speed from the COVID-19 recession, leaving factories, freight yards, ports and businesses overwhelmed with customer orders and creating shortages, delays and higher prices. The high borrowing rates engineered by major central banks, along with the end of supply chain logjams, brought inflation dramatically down from the four-decade highs it hit in mid-2022.
And to the surprise of forecasters, the economy — especially the largest, in the United States — continued to grow and employers kept hiring despite higher borrowing costs.
“The decline in inflation without a global recession is a major achievement,’' Gourinchas wrote in a blog post that accompanied the IMF’s latest World Economic Outlook.
The IMF, a 190-nation lending organization, works to promote economic growth and financial stability and reduce global poverty. On Tuesday, besides sketching a milder inflation outlook, it upgraded its economic expectations for the United States this year, while lowering its estimates for growth in Europe and China. The IMF left its forecast for global growth unchanged at a relatively lackluster 3.2% for 2024.
The IMF expects the U.S. economy to expand 2.8% this year, down slightly from 2.9% in 2023 but an improvement on the 2.6% it had forecast for 2024 back in July. Growth in the United States has been led by strong consumer spending, fueled by healthy gains in inflation-adjusted wages.
Next year, though, the IMF expects the U.S. economy to decelerate to 2.2% growth. With a new presidential administration and Congress in place, the IMF envisions the nation’s job market losing some momentum in 2025 as the government begins seeking to curb huge budget deficits by slowing spending, raising taxes or some combination of both.
The IMF expects China’s economic growth to slow from 5.2% last year to 4.8% this year and 4.5% in 2025. The world’s No. 2 economy has been hobbled by a collapse in its housing market and by weak consumer confidence — problems only partly offset by strong exports.