The Daily Times Newspaper

IMF Thinks Inflation will Rise Further This Year and Then Weaken

35,265

Inflation, which has been rising for some time in many countries, is likely to peak sometime in the coming months. Thereafter, the increase in the overall price level will return to a more normal level, the International Monetary Fund (IMF) predicts.

 

The organization’s economists think the latter will happen about the middle of next year.

In a new estimate for inflation in developed economies, the IMF anticipates a peak of 3.6 percent at the end of this year. Six months later, inflation should be at 2 percent, which is in line with central bank targets. Prices in emerging markets are currently rising faster. The IMF foresees a similar development there, but with different percentages.

Many uncertainties still surround the new estimates. It is, therefore, possible that the strong price increases will last longer. But the report does show that the fund shares central banks’ view that recent high inflation is likely a temporary phenomenon.

Oil prices and gas prices are currently rising rapidly. Due to, for example, disruptions in international shipping, many other raw materials have also become a lot more expensive. Manufacturers pass this on to consumers, who also notice that life is becoming more expensive. High inflation in many countries has also had a grip on stock exchange floors for some time. Investors are afraid that central banks will intervene by phasing out their support policy more quickly. The latter is something investors would rather not see happen.

Earlier this week, IMF CEO Kristalina Georgieva warned that the impact of the sharply rising inflation should not be underestimated. Food became tens of percent more expensive worldwide. This could hinder the economic recovery from the corona crisis.

Poorer countries and households are particularly affected by rising food and energy prices, Georgieva said in a speech before Bocconi University in Milan. The IMF has already announced that IMF will be lowering growth expectations for the global economy at its upcoming autumn meeting.

Leave A Reply