The International Monetary Fund (IMF) has unveiled its projections for global headline inflation, revealing a downward trajectory from an estimated 6.8% in 2023 to 5.8% in 2024 and further to 4.4% in 2025. The IMF’s January 2024 World Economic Outlook Report indicates a steadfast forecast for 2024 compared to previous October 2023 projections, with a slight downward revision of 0.2 percentage points for 2025.
Accoding to the IMF, advanced economies are poised to experience a more rapid disinflationary trend, with inflation anticipated to decrease by 2.0 percentage points in 2024 to reach 2.6%. Conversely, emerging market and developing economies are projected to witness a more modest decline of 0.3 percentage points, stabilizing at 8.1%.
While the forecast undergoes downward revisions for advanced economies in both 2024 and 2025, emerging market and developing economies see an upward revision for 2024. This shift is primarily attributed to factors such as Argentina’s realignment of relative prices, the elimination of legacy price controls, past currency depreciation, and ensuing pass-through effects into prices, expected to elevate inflation in the short term.
The drivers of declining inflation vary by country but generally reflect reduced core inflation due to persistent tight monetary policies, softening labor markets, and pass-through effects stemming from earlier and ongoing declines in relative energy prices.
Notably, approximately 80% of the world’s economies are poised to experience lower annual average headline and core inflation in 2024. Among economies with inflation targets, headline inflation is projected to hover 0.6 percentage points above target for the median economy by the fourth quarter of 2024, marking a reduction from the estimated 1.7 percentage point gap observed at the close of 2023.
Expectations indicate that most of these economies are on track to achieve their targets or target range midpoints by 2025.
In several major economies, the downward adjustment to the projected inflation path, coupled with modest improvements in economic activity, suggests a softer-than-anticipated landing.
Source: norvanreports