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Informist, Tuesday, Oct. 22, 2024

 

--IMF: Global battle against inflation has largely been won

--CONTEXT: IMF releases World Economic Outlook report

--IMF: See India FY25 retail inflation at 4.4%, 4.1% in FY26

--IMF: Inflation near central bks' targets allows for "policy triple pivot"

 

NEW DELHI – The International Monetary Fund said Tuesday that the global battle against inflation has "largely been won", forecasting that consumer prices will rise 5.8% in 2024 and 4.3% in 2025, down from a 6.7% increase in 2023. The latest annual retail inflation forecasts are 10 basis points lower than what had been predicted in July.

 

"After peaking at 9.4% year over year in the third quarter of 2022, headline inflation rates are now projected to reach 3.5% by the end of 2025, below the average level of 3.6?tween 2000 and 2019," the multilateral agency said in its World Economic Outlook report.

 

For India, the IMF sees headline retail inflation averaging 4.4% in 2024-25 (Apr-Mar) and 4.1% in FY26, broadly in line with the numbers projected by the Reserve Bank of India. In FY24, India's CPI inflation averaged 5.4%.

 

According to the IMF, inflation returning to central banks' targets "paves the way for a much-needed policy triple pivot". The first of these pivots is the loosening of monetary policy, which has already begun as several major central banks have started to cut interest rates this year and change their stance to neutral. This, the IMF said, would help support economic activity and ward off downside risks to growth. However, the agency continued to call for "vigilance", noting that services inflation remains "too elevated" and "almost twice as high as before the pandemic".

 

"Furthermore, we have now entered a world dominated by supply disruptions--from climate, health, and geopolitics. It is always harder for monetary policy to maintain price stability when faced with such shocks, which simultaneously increase prices and reduce output," the IMF added.

 

The second policy pivot cited by the IMF called for stabilisation of debt dynamics and rebuilding "much-needed fiscal buffers" after several years of loose fiscal policy. Finally, the third pivot called for more structural reforms to boost long-term growth prospects and productivity. The IMF said that improving the outlook for growth is the only way to tackle the numerous challenges the world faces, ranging from ageing and declining populations in many parts of the world to climate transition.

 

"Unfortunately, medium-term global growth remains lacklustre, at 3.1%. While much of this reflects China's weaker outlook, medium-term prospects in other regions, such as Latin America and the European Union, have also deteriorated," it said.  End

 

Reported by Siddharth Upasani

Edited by Avishek Dutta

 

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