eBusiness Weekly
The International Monetary Fund lifted its global inflation forecast for next year and called for central banks to keep policy tight until there’s a durable easing in price pressures.
The IMF boosted its projection for the pace of consumer price increases across the world to 5.8% for next year in its World Economic Outlook released Tuesday, up from 5.2% seen three months ago. The call for vigilance on inflation comes as it also trimmed the forecast for economic growth in 2024.
In most countries, the IMF, an institution charged with monitoring the health of the global economy, 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 this week in Marrakech, Morocco — the first time they’ve been held in Africa in 50 years.
The event unfolds in the wake of a deadly weekend assault on Israel by Hamas that shook the world and revived fears of a wider conflict in the Middle East — home to almost a third of global supply of oil. The attacks present another factor in a period marked by global uncertainty.
Central banks in major economies including the US and European Union have raised interest rates aggressively for more than a year to curb inflation that reached 8.7% globally in 2022, the highest level since the mid 1990s.
“Monetary policy needs to remain tight in most places until inflation is durably coming down towards targets,” Pierre-Olivier Gourinchas, the IMF’s chief economist, said in a briefing with reporters. “We’re not quite there.”
The surge was spurred by factors including coronavirus pandemic supply chain disruptions; fiscal stimulus in response to the global lockdown; subsequent strong demand and a tight labor market in the US; 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% for next year, down 0.1% from its outlook in July, and below the 3.8% average of the two decades before the pandemic. Its forecast for 2023 is unchanged at 3%.
Since April, the fund has been warning that medium-term prospects have weakened. Factors holding back the expansion include the long-term consequences of the pandemic; the invasion of Ukraine; the breakdown of the world economy into blocs; and the central bank policy tightening. — Bloomberg
