Victory Declared in Global Fight Against Inflation

The International Monetary Fund (IMF) announced on Tuesday that high inflation has mostly been defeated globally, offering a surprisingly positive outlook after previously warning that progress had stalled. "It looks like the global battle against inflation has largely been won, even if price pressures persist in some countries," the IMF stated in its latest World Economic Outlook. The report highlighted that inflation in most countries is now close to central bank targets, and the decline without triggering a global recession is a significant achievement. However, the IMF cautioned that vigilance remains essential.

The IMF noted that inflation in services remains high, nearly double pre-pandemic levels, and some developing economies have started raising interest rates again due to a resurgence of inflation. The IMF projects global inflation to slow to 5.8% this year, slightly below its July forecast of 5.9%, and to fall to 3.5% by the end of next year, which is marginally below the pre-pandemic average.

This optimistic outlook on consumer prices comes just weeks before the US election, where inflation is a key issue for voters. Despite the cooling pace of annual price rises, goods and services in the US cost about 20% more in August than in February 2020. The Federal Reserve, which cut interest rates for the first time in over four years last month, has not yet declared victory over inflation. Fed Chair Jerome Powell emphasized that they are not saying "mission accomplished."

Similarly, European Central Bank President Christine Lagarde has refrained from declaring an end to high inflation in Europe, stating that "inflation is on the right track" but acknowledging that the central bank has not yet "broken the neck of inflation."

While the risks of rising inflation are diminishing globally, the IMF warned that threats to economic growth are increasing. The agency cited higher commodity prices due to the Middle East conflict and increased tariffs and protectionist policies as significant risks. The IMF forecasts the global economy to expand by 3.2% this year, with an upgraded US growth forecast of 2.8%. However, the eurozone's growth is expected to be only 0.8%, and China's growth forecast has been downgraded to 4.8% for 2024. India is projected to grow by 7%, consistent with previous predictions.