International Monetary Fund (IMF) officials on Tuesday raised their outlook for the U.S. economy, raising the alarm on post-pandemic inflation and putting the United States at the center of global growth prospects among advanced economies.
The IMF expects real gross domestic product (GDP) to grow by 2.8% this year, an upward revision from its July forecast of 2.6%. The IMF forecast a growth rate of 2.2% in 2025, higher than the previous forecast of 1.9%.
“Inflation rates in most countries are currently running close to central banks' targets,” IMF Research Director Pierre-Olivier Grinchat said at a press conference on Tuesday.
Inflation peaked at 9% in mid-2022 and has since eased toward the Federal Reserve's target rate of interest rate increases of 2% a year. The decline occurred without a recession, largely achieving the Fed's goal of a “soft landing” for the economy, which IMF officials acknowledged on Tuesday.
Grinchas said that easing inflation has more to do with temporary economic factors, such as normalizing supply and absorbing economic relief, than with Fed rate hikes, but that monetary policy has helped stabilize price expectations. said.
“The fact that inflation has come down without a global recession is a major achievement,” he said. “Much of that disinflation can be attributed to improvements in labor supply due to immigration, as well as a relaxation of the unique combination of supply and demand that caused inflation in the first place.”
The IMF expects the trend of lower inflation to continue, particularly with respect to output and service prices, in contrast to more volatile commodity prices.
“The decline in global inflation in 2024 and 2025 reflects a broader decline in core inflation, unlike the situation in 2023, when headline inflation declined primarily due to lower fuel prices. “Core inflation is expected to decline by 1.3 percentage points in 2024,” IMF economists said in their World Economic Outlook report.
The international financial institution also warned of a slowdown in global growth in the coming years, pointing to China's real estate market, demographic changes, declining cross-border investment and various fiscal policy issues at the national level. War and geopolitical instability were also top concerns.
“Structural challenges such as an aging population, weak investment and historically low total factor productivity growth continue to hinder global growth,” the report said.
Recent US economic data has been strong despite concerns about a contraction into next year. The unemployment rate has fallen for the second month in a row and is nearing historic lows even as prices fall toward the Fed's 2% annual target.
The final estimate for second-quarter GDP growth recorded by the Commerce Department in September was 3%.
Minutes from the Fed's latest rate-setting committee also showed that officials remain confident in the state of the economy.
