The International Monetary Fund (IMF) has stated that inflation is declining more rapidly than anticipated but has not been completely defeated.
Kristalina Georgieva, the Managing Director of the IMF, made this remark during the China Development Forum (CDF) 2024 in Beijing, which was hosted by the Atlantic Council Think Tank.
Kristalina advised central bankers to carefully adjust their decisions regarding interest rate reductions based on incoming data.
She noted that headline inflation for advanced economies dropped to 2.3 per cent in the final quarter of 2023, down from 9.5 per cent just 18 months earlier, and this downward trajectory is expected to continue in 2024.
According to her, this will create the conditions for central banks in major advanced economies to begin cutting rates in the second half of the year.
She, however, said the pace and timing would vary.
“On this final stretch, it is doubly important that central banks uphold their independence,” Ms Georgieva said.
She urged policymakers to resist calls for early rate cuts when necessary.
“Premature easing could see new inflation surprises that may even necessitate a further bout of monetary tightening.
“On the other side, delaying too long could pour cold water on economic activity,” she said.
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Ms Georgieva said next week’s World Economic Outlook would show that global growth is marginally stronger given robust activity in the U.S. and many emerging market economies, but gave no specific new forecasts.
She said strong labour markets and an expanding labour force, strong household consumption and easing supply chain issues were helping the global economy’s resilience. However, she said there were still “plenty of things to worry about”.
“The global environment has become more challenging. Geopolitical tensions increase the risks of fragmentation.
“As we learned over the past few years, we operate in a world in which we must expect the unexpected,” Ms Georgieva said.
She said global activity was weak by historical standards, and prospects for growth had slowed since the global financial crisis of 2008-2009.
“The global output loss since the start of the COVID-19 pandemic in 2020 was $3.3 trillion, disproportionately hitting the most vulnerable countries.”
Ms Georgieva said the U.S. had seen the strongest rebound among advanced economies, helped by rising productivity growth.
“Euro area activity is recovering more gradually, given the lingering impact of high energy prices and weaker productivity growth.
“Among emerging market economies, countries like Indonesia and India are faring better, but low-income countries have seen the most severe scarring,” she said.
Nigeria’s annual inflation rate rose to 31.70 per cent in February from 29.90 per cent in January, the National Bureau of Statistics (NBS) said on Friday.
The statistics office said the February headline inflation rate increased by 1.80 per cent compared to January’s.
