IMF predicts inflation drop but warns of economic risks

The International Monetary Fund (IMF) has projected a significant decline in global inflation, predicting it will fall to 3.5% by the end of 2025. 

According to IMF Chief Economist Pierre-Olivier Gourinchas, this marks substantial progress in the "battle against inflation," which peaked at 9.4% in 2022. 

He stated, "The battle against inflation is almost won," noting that inflation is now closer to central bank targets in many countries. 

The latest World Economic Outlook report expects global growth to hold steady at 3.2% in 2024 and 2025, highlighting a resilient global economy.

Lower inflation could benefit risk assets like cryptocurrencies and reduce the cost of living. 

However, Gourinchas cautioned that geopolitical and trade tensions, particularly in the Middle East, pose risks to commodity markets and economic stability. 

The IMF called for a "policy triple pivot" focused on interest rate adjustments, government spending control, and productivity reforms to mitigate these challenges.

While the report noted avoiding a global recession amid falling inflation would be a “major achievement,” the growth outlook remains weak. 

The IMF forecasted robust growth in the U.S. and emerging Asian economies driven by artificial intelligence investments, but it lowered its outlook for several advanced economies and emerging markets, citing escalating conflicts and commodity price risks.

In a related development, billionaire investor Paul Tudor Jones expressed a contrasting view, expecting inflation to worsen due to the growing U.S. debt. 

He pointed to the projected $1.9 trillion deficit in the 2024 fiscal year, which is expected to rise to $2.8 trillion by 2034. 

Jones remarked, "The playbook to get out of this is that you inflate your way out," suggesting increased spending without reforms could deepen financial troubles.