The IMF lifted its global inflation forecast for next year and called for central banks to keep policy tight until there is a durable easing in price pressures.
The IMF boosted its projection for the pace of consumer price increases across the world to 5.8 percent for next year in its World Economic Outlook released yesterday, up from its forecast of 5.2 percent three months ago.
The call for vigilance on inflation comes as it also trimmed the forecast for next year’s economic growth.
Photo: EPA-EFE
In most countries, the IMF foresees inflation remaining above central bank targets until 2025.
The forecasts are a much-anticipated event at annual IMF-World Bank meetings, which are taking place until Sunday in Marrakech, Morocco.
Central banks in major economies, including the US and the EU, have raised interest rates aggressively for more than a year to curb inflation, which reached 8.7 percent globally last year, the highest level since the mid-1990s.
“Monetary policy needs to remain tight in most places until inflation is durably coming down towards targets,” IMF chief economist Pierre-Olivier Gourinchas said in a briefing with reporters. “We’re not quite there.”
The surge was spurred by factors including COVID-19 pandemic supply chain disruptions; fiscal stimulus in response to the global lockdown; subsequent strong demand and a tight US labor market; and food and energy disruptions from Russia’s invasion of Ukraine, which had a particular effect in Europe and the UK.
The fund sees global growth of 2.9 percent for next year, down 0.1 percentage point from its outlook in July, and below the 3.8 percent average of the two decades before the pandemic. Its forecast for this year is unchanged at 3 percent.
While the global growth outlook is low, it is relatively stable and the IMF sees better odds that central banks can tame inflation without sending the world into recession.
Yet the steadiness in the IMF’s aggregate projection for growth masks some important changes in the individual country forecasts that underpin it. It raised its growth estimate for the US for this year to 2.1 percent from 1.8 percent and next year’s estimate to 1.5 percent from 1 percent, based on stronger business investment in the second quarter and resilient consumption growth.
On the other hand, the growth forecast for China was cut to 5 percent from 5.2 percent for this year and to 4.2 percent from 4.5 percent for next year.
The IMF also lowered its growth estimate for Taiwan by 1.3 percentage points to 0.8 percent this year, but forecast growth of 3 percent next year.
The growth estimate for the eurozone was cut to 0.7 percent this year from 0.9 percent, and to 1.2 percent next year from a 1.5 percent projection earlier. Japan’s growth forecast was raised to 2 percent this year from a previous projection of 1.4 percent.
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