Global Inflation to drop to 3.5% by 2025 - IMF

Accra, Ghana -  October 24, 2024 - The International Monetary Fund (IMF) has announced that the world is on the cusp of defeating inflation, which skyrocketed to 9.4% in the third quarter of 2022.

According to Pierre-Olivier Gourinchas, IMF Chief Economist, global headline inflation is projected to plummet to 3.5% by the end of 2025. 

This optimistic forecast is attributed to the global economy's resilience, with steady growth expected at 3.2% for both 2024 and 2025.

Key Factors Behind the Decline:

- Unwinding of supply and demand shocks: The unique combination of shocks that fueled inflation is dissipating.
- Improved labor supply: Immigration in advanced countries has driven labor supply growth.
- Effective monetary policy: Central banks have successfully managed inflation expectations.

However, Gourinchas cautioned that regional conflicts and undesirable trade policies pose significant risks to the progress made. To mitigate these risks, he recommended a "policy-triple-pivot".

- Careful monetary policy easing
- Stabilizing debt dynamics through fiscal policy
- Growth-enhancing reforms

The IMF Chief Economist emphasized the importance of building trust between governments, citizens, and corporations, as well as strengthening international collaborations, to sustain the momentum of inflation easing and economic growth.

“The battle against inflation is almost won; after peaking at 9.4 per cent year-on-year in the third quarter of 2022, we now project global headline inflation will fall to 3.5 per cent by the end of next year.”

''Monetary policy played a decisive role in keeping inflation expectations.To mitigate these downside risks and to strengthen growth, policymakers now need to shift gears and implement a policy-triple-pivot,” Mr Gourinchas recommended.

Source: Lead News Online