The IMF Says "Inflation and War Until 2024" Are Far From the Worst

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] "The worst is yet to come."

The International Monetary Fund (IMF), which has once again lowered its economic growth forecast for next year, stated that despite ongoing concerns about economic slowdown, monetary tightening policies by central banks around the world, including the Federal Reserve (Fed), must continue. The fight against inflation is expected to persist through 2024.

Pierre-Olivier Gourinchas, IMF Chief Economist, predicted at a press conference held after the release of the World Economic Outlook report on the 11th (local time) that the global inflation rate will rise from 4.7% last year to 8.8% this year. He also forecasted that high inflation levels could persist longer than expected.

In particular, the IMF recommended that central banks maintain their tightening paths. Economist Gourinchas said, "This does not mean we need to accelerate now, but it also does not mean we should stop the path of monetary normalization." This statement is interpreted as emphasizing the current tightening efforts to curb inflation while cautioning that increasing the pace could lead to greater side effects. He pointed out concerns for the future, such as Europe’s energy crisis and the impact of a strong dollar, saying, "The fight against inflation may be more difficult than we currently expect."

In a separate interview with foreign media, Economist Gourinchas also said, "It will take time for core inflation to fall to the target of 2%," adding, "We will not return to the target by 2023. It will be around 2024 when we get closer to the target."

On the same day, Loretta Mester, President of the Cleveland Federal Reserve Bank, also stated in New York that the Fed faces "a greater risk of tightening too little than tightening too much," and she expects the Fed to reach its inflation target of 2% around 2025. She particularly anticipated that below-trend growth, labor market deterioration, and financial market volatility will be inevitable during this process. She reiterated, "The current inflation level is too high," emphasizing the need for more restrictive monetary policy.

Meanwhile, the IMF presented its global growth forecast for next year at 2.7%, down 0.2 percentage points from the July forecast. This marks the third downward revision this year and a significant 1.1 percentage point decrease compared to the beginning of the year. The IMF expects that countries accounting for one-third of the global economy will experience at least two consecutive quarters of contraction either this year or next year.

The IMF diagnosed, "Along with soaring inflation, the global economy is experiencing a sharper and broader slowdown than expected," citing immediate cost-of-living crises, simultaneous monetary tightening, Russia’s invasion of Ukraine, and the prolonged COVID-19 pandemic as heavy burdens weighing on the economic outlook.

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