The International Monetary Fund (IMF) has announced that the global battle against inflation is nearly won, with inflation projected to drop significantly from its peak of 9.4% in the third quarter of 2022.
IMF Chief Economist Pierre-Olivier Gourinchas shared this optimistic outlook during the release of the World Economic Outlook at the 2024 IMF/World Bank Annual Meetings in Washington, D.C. on October 22. Gourinchas highlighted that global inflation is expected to fall to 3.5% by the end of 2025, down from 5.8% predicted for 2024.
He attributed the decline in inflation without a significant recession to the resilience of the global economy, steady growth projections of 3.2% for both 2024 and 2025, and the unwinding of supply and demand shocks. Other factors include improvements in labor supply, driven by immigration in advanced economies, and effective monetary policy in maintaining inflation expectations.
Despite the positive outlook, Gourinchas cautioned that risks remain, including regional conflicts and potential shifts in trade and industrial policies, which could disrupt the progress made.
To address these challenges, Gourinchas recommended a “policy-triple-pivot” approach: gradual easing of monetary policy, stabilizing debt dynamics through fiscal policy, and implementing growth-enhancing reforms. He also stressed the importance of building trust between governments, citizens, and corporations, as well as enhancing international cooperation to sustain inflation control and economic growth.