IMF "Inflation Will Decline, but Central Banks Must Prepare Response Strategies"

Inflation Rise Expected to Slow but Volatility Risks Warned
"Housing Costs, Supply Chain Collapse, Food Prices, Emerging Market Currencies May Drive Inflation"
"No Evidence Wage-Driven Inflation Exists"

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The International Monetary Fund (IMF) expects inflation to peak this year and return to pre-COVID-19 pandemic levels by mid-next year, but warned that supply chain issues could continue to fuel inflationary pressures, urging policymakers worldwide to respond carefully.

On the 6th (local time), the IMF suggested in its blog post titled 'The Fear of Inflation' that central banks around the world must navigate precisely between patience in supporting economic recovery and swift action against surging inflation.

The IMF stated, "It is especially important to establish a sound monetary framework, including the timing of tapering economic support to curb inflation."

The IMF forecasted that consumer price inflation in advanced economies will peak at 3.6% this fall and decline to about 2% by mid-next year.

It also projected that inflation in emerging and developing economies will rise to 6.8% this fall before falling to around 4% next year.

The IMF assessed that recent inflation has been driven by suppressed demand following COVID-19, increased savings due to fiscal and monetary stimulus, sharp rises in commodity prices, supply shortages, and supply chain disruptions.

Factors expected to drive future inflation increases include sharp rises in housing costs, supply chain breakdowns, food price increases in emerging markets, and currency depreciation.

The IMF noted that international food prices have risen 40% since the COVID-19 crisis, severely impacting low-income countries.

Simulations reflecting supply chain breakdowns and commodity price surges suggest that inflation increases will persist for a considerable period and exhibit high volatility, according to the IMF.

The IMF judged that concerns about economic recovery policies causing wage increases and overheating leading to inflation are weakly supported. It analyzed that there were almost no signs of faster wage growth across the economy until mid-this year.

The IMF expects U.S. inflation to help accelerate advanced economies but estimates that inflationary pressures in Europe and Japan remain relatively low.

This content was produced with the assistance of AI translation services.