IMF: Inflation Fades, But Global Challenges Still Loom on the Horizon
Global economic resilience shows promise, yet geopolitical tensions could derail progress
- Global inflation peaked at 9.4% in Q3 2022
- The global economy shows steady growth of 3.2% for 2024 and 2025
- IMF urges policymakers to implement a "policy-triple-pivot" to ensure continued progress
The International Monetary Fund (IMF) reports that the global struggle against inflation is nearing a successful conclusion, following a peak rate of 9.4% in Q3 of 2022.
IMF Chief Economist Pierre-Olivier Gourinchas stated, “The battle against inflation is almost won; we anticipate a drop in global headline inflation to 3.5% by the end of next year.” Most countries are now aligning their inflation rates with central bank targets.
While the forecasted decline to 3.5% in 2025 is an improvement from the 5.8% projected for 2024, Gourinchas highlighted the resilience of the global economy, which is expected to maintain a growth rate of 3.2% for both 2024 and 2025.
This decline in inflation, achieved without a major recession, is a significant accomplishment, largely due to the unwinding of various supply and demand shocks and enhanced labor supply through immigration in many advanced economies.
Despite these positive developments, Gourinchas warned of lingering risks, particularly from escalating regional conflicts that could disrupt commodity markets, as well as adverse trade and industrial policy shifts that might hinder economic output.
He emphasized the need for a “policy-triple-pivot” to navigate these challenges, which includes cautious monetary policy easing, stabilizing debt dynamics through fiscal measures, and implementing growth-enhancing reforms.
Gourinchas also stressed the importance of building trust between governments, citizens, and corporations, along with fostering international cooperation to maintain the momentum in easing inflation and sustaining economic growth.
