The International Monetary Fund cut global growth and revised inflation upwards in its World Economic Outlook published Tuesdayand urged central banks to raise interest rates to stave off an inflationary spiral.
The IMF sees inflation rising to 5.7 percent in advanced economies and 8.7 percent in emerging and developing economies – up 1.8 and 2.8 percentage points, respectively, from the last forecast.
For this reason, “tightening monetary policy will be appropriate to stop the cycle of higher prices pushing up wages and inflation expectations and wages and inflation expectations pushing prices up,” the IMF wrote and conceded one that in the countries most affected by the war in Ukraine “The compromise between ensuring growth and containing inflation is becoming more difficult.”
Meanwhile, global growth has been revised down to 3.6 percent for both 2022 and 2023, down 0.8 percentage point this year and 0.2 percentage point in 2023 compared to the IMF’s January forecast. These revisions assume that the war will remain confined to Ukraine; that further sanctions against Russia will exempt the energy sector; and that the pandemic is easing throughout the year.
In the EU, however, the decline is larger: growth is slowing to 2.9 percent this year and 2.5 percent next, or down 1.1 percentage points this year and 0.3 percentage points next, due to the bloc’s twin storms an energy import crisis and rising energy prices.
Governments should prioritize support for vulnerable households and refugees over debt consolidation, but “that support should be deployed in ways that avoid exacerbating persistent supply-demand imbalances and price pressures,” the IMF wrote.
https://www.politico.eu/article/imf-warns-of-inflationary-spiral/?utm_source=RSS_Feed&utm_medium=RSS&utm_campaign=RSS_Syndication IMF warns of spiraling inflation – POLITICO