The International Monetary Fund (IMF) has disclosed that the global battle against inflation has largely been won, even if price pressures persist in some countries.
IMF in its latest World Economic Outlook released on Tuesday, projected that headline inflation will fall from a peak of 9.4% year-on-year in 2022 to 3.5% by the end of 2025.
The global agency said, “it looks like the global battle against inflation has largely been won, even if price pressures persist in some countries.
“After peaking at 9.4 percent year-on-year in the third quarter of 2022, we now project headline inflation will fall to 3.5 percent by the end of next year, slightly below the average during the two decades before the pandemic.
“In most countries, inflation is now hovering close to central bank targets, paving the way for monetary easing across major central banks,” it said.
Speaking further on the report, Pierre-Olivier Gourinchas, the chief economist of the IMF said, “the global economy remained unusually resilient throughout the disinflationary process. Growth is projected to hold steady at 3.2 percent in 2024 and 2025, but some low-income and developing economies have seen sizable downside growth revisions, often tied to intensifying conflicts”.
He said, “in advanced economies, growth in the United States is strong, at 2.8 percent this year, but will revert toward its potential in 2025.
“For advanced European economies, a modest growth rebound is expected next year, with output approaching potential.
“The growth outlook is very stable in emerging markets and developing economies, around 4.2 percent this year and next, with continued robust performance from emerging Asia”, he said.
The IMF chief economist, however, warned that despite the good news on inflation, downside risks are increasing and now dominate the outlook.
“An escalation in regional conflicts, especially in the Middle East, could pose serious risks for commodity markets.
“Shifts toward undesirable trade and industrial policies can significantly lower output relative to our baseline forecast.
“Monetary policy could remain too tight for too long, and global financial conditions could tighten abruptly”, he said.
Gourinchas maintained that the return of inflation near central bank targets paves the way for a policy triple pivot.
This, according to him, would provide much-needed macroeconomic breathing room, at a time where risks and challenges remain elevated.
“The first pivot—on monetary policy—is under way already. Since June, major central banks in advanced economies have started to cut policy rates, moving toward a neutral stance.
“This will support activity at a time when many advanced economies’ labour markets are showing signs of cooling, with rising unemployment rates.
“So far, however, the rise in unemployment has been gradual and does not point to an imminent slowdown”, he said.
