IMF Chief Economist Says Battle Against Inflation ‘Almost Won’

The chief economist for the International Monetary Fund (IMF) told reporters on Tuesday that “the battle against inflation is almost won,” amid falling inflation data.

Pierre-Olivier Gourinchas said that inflation in many countries is now nearing central bank targets.

However, he cautioned that while lower interest rates are a relief, efforts to rein in vast government deficits could dampen growth prospects.

In its latest report, the IMF said that inflation is expected to continue to fall worldwide, down from 6.7 percent in 2023 to 5.8 percent this year and 4.3 percent in 2025.

The IMF noted that inflation is cooling faster in advanced economies, potentially easing pressure on central banks.

By 2025, inflation rates in wealthy nations are expected to reach two percent, hitting targets set by major central banks including the Federal Reserve and the European Central Bank.

This should be good news for growth, but the IMF expects global growth to fall slightly from 3.3 percent last year to 3.2 percent.

This compares to pre-pandemic rates which averaged 3.8 percent a year between 2000 and 2019.

The IMF forecast for the U.S. was upgraded, and the economy is now expected to expand by 2.8 percent in 2024.

This is lower than the 2.9 percent growth seen in 2023 but an improvement on the 2.6 percent that was forecast back in July.

The upgrade was driven by an uptick in consumer spending triggered by higher inflation-adjusted wages.

However, U.S. growth is expected to slow again to 2.2 percent in 2025, triggered by a new presidential administration and Congress following the election.

The labor market is expected to cool while the government tackles ballooning budget deficits, potentially by cutting spending, raising taxes, or both.

Gourinchas noted that reduced immigration could hamper economic growth in the U.S. and other developed nations by exacerbating labor shortages.

He also highlighted the destabilizing affect of ongoing conflicts, including the war in Ukraine and conflict in the Middle East.

Meanwhile, China’s economic growth is set to decelerate from 5.2 percent last year to 4.8 percent in 2024, and further down to 4.5 percent in 2025.

The world’s second-largest economy is grappling with a struggling housing market and weakened consumer spending, which have only been partially offset by strong export performance.

The IMF’s outlook for Europe remains grim.

The 20-nation eurozone is predicted to grow at just 0.8 percent in 2024, double the previous year’s 0.4 percent expansion but slightly down from earlier projections.

Germany, the region’s economic powerhouse, is expected to see zero growth this year while it battles a downturn in manufacturing and real estate.

The IMF also warned that heightened tensions—especially between the U.S. and China—could disrupt global trade.

A potential shift toward trade within alliances instead of open market efficiencies could further strain the global economy.

Despite this, trade volumes are projected to grow 3.1 percent this year and 3.4 percent in 2025, up from last year’s sluggish 0.8 percent.

This article includes reporting from The Associated Press