The International Monetary Fund (IMF) has declared that the global battle against inflation is nearing victory, with inflation projected to fall significantly by 2025.
Mr Pierre-Olivier Gourinchas, the IMF’s Chief Economist, said global headline inflation, which peaked at 9.4% in the third quarter of 2022, is expected to drop to 3.5% by the end of next year.
Speaking at the release of the World Economic Outlook during the 2024 IMF and World Bank Annual Meetings in Washington, DC, Mr. Gourinchas noted that most countries were now seeing inflation within their central banks’ targets.
For 2024, the IMF has forecasted a global inflation rate of 5.8%, which is set to decline further to 3.5% in 2025.
“The decline in inflation without a significant recession is a major achievement,” he remarked, crediting the global economy’s resilience, which is expected to maintain steady growth at 3.2% for both 2024 and 2025.
Mr. Gourinchas attributed the disinflation to the easing of supply and demand shocks that had previously driven inflation, along with improvements in labour supply, particularly in advanced economies, where immigration played a key role.
He also pointed to the decisive impact of monetary policy in managing inflation expectations.
However, the IMF’s chief economist warned that risks remain.
He highlighted the potential for regional conflicts to disrupt commodity markets, and expressed concerns over shifts in trade and industrial policies that could negatively impact economic output.
Such risks, he noted, could tighten global financial conditions and derail the progress made in combating inflation.
To mitigate these risks and strengthen global growth, Mr. Gourinchas proposed a “policy-triple-pivot.”
This would involve a cautious easing of monetary policy rates, stabilisation of debt through fiscal policies, and the implementation of growth-enhancing reforms.
He also stressed the importance of fostering trust between governments, citizens, and corporations, as well as enhancing international cooperation to maintain momentum in reducing inflation and sustaining economic growth.
