According to the International Monetary Fund (IMF), the world has made significant progress in the fight against inflation, with rates peaking at 9.4% in the third quarter of 2022.
The fight against inflation is nearly over; having reached a peak of 9.4 per cent year-on-year in the third quarter of 2022, it is expected to decrease to 3.5 per cent by the end of the following year.
Pierre-Olivier Gourinchas, IMF Chief Economist, stated that most countries were observing inflation rates that align with Central Banks’ targets.
Inflation is expected to decrease by 3.5 per cent in 2025, which is a smaller drop than the 5.8 per cent forecasted by the Fund for 2024.
Mr Gourinchas made this statement during the unveiling of the World Economic Outlook on Tuesday, October 22, at the 2024 IMF/World Bank Group Annual Meetings in Washington, DC.
He attributed the slowdown in inflation without a significant recession to the resilience of the global economy. Growth was expected to remain stable at 3.2 per cent for both 2024 and 2025.
Achieving a significant decline in inflation without experiencing a major recession is a notable accomplishment. The disinflation can be mostly attributed to the reversal of the special mix of supply and demand shocks.
Improvements in labour supply, driven by immigration in many advanced countries, were cited as contributing factors. The speaker also mentioned that monetary policy played a crucial role in managing inflation expectations.
The IMF Chief Economist warned of continued risks ahead due to escalating regional conflicts, which he believed could severely impact commodity markets.
He stated that undesirable trade and industrial policy shifts have the potential to reduce economic output and tighten global financial conditions, leading to setbacks in the progress achieved.
Mr. Gourinchas suggested that policymakers must now change their approach in order to address these risks and promote growth.
The policy-triple-pivot involved a strategic decrease in the monetary policy rate, a focus on stabilizing debt dynamics via fiscal policy and creating reserves, as well as implementing reforms to boost growth.
He emphasized the need to strengthen relationships between governments and citizens and corporate discussions, while also enhancing international partnerships to continue the progress of reducing inflation and promoting economic growth.
