The International Monetary Fund (I.M.F.) stated on Tuesday that despite lingering inflation and a slow recovery in China, the world economy is displaying signs of resilience this year. This raises the possibility of avoiding a global recession unless unexpected crises occur. The I.M.F.’s latest World Economic Outlook provides optimism to global policymakers, giving them more confidence in their efforts to control inflation without causing significant economic damage. However, global growth remains modest compared to historical standards, and the I.M.F. economists cautioned that there are still serious risks to consider.
The I.M.F. has revised its forecast for global growth in 2023 to 3 percent, up from the 2.8 percent projected in April. It predicts a decrease in global inflation from 8.7 percent in 2022 to 6.8 percent this year and 5.2 percent in 2024 as higher interest rates have an impact worldwide.
The improved outlook is largely due to the stabilization of financial markets, which were previously disrupted by the collapse of several major banks in the United States and Europe. Another significant financial risk was averted in June when Congress acted to raise the U.S. government’s borrowing cap, ensuring timely payment of bills by the world’s largest economy.
These new figures from the I.M.F. coincide with the widely expected quarter-point interest rate hike by the Federal Reserve at its upcoming meeting. The Fed has been aggressively raising rates to combat inflation, increasing them from near zero in March 2022 to the current range of 5 percent to 5.25 percent. Policymakers have been striving to cool down the economy without causing a downturn and kept rates steady in June to assess the impact of higher borrowing costs approved by the Fed.
As countries like the United States grapple with inflation, the I.M.F. urges central banks to prioritize restoring price stability and strengthening financial supervision.
On Wednesday, Fed officials will announce their interest rate decision for July, followed by a news conference with Fed Chair Jerome H. Powell. While policymakers had previously indicated the possibility of another rate hike in 2023, investors doubt its likelihood. Officials are likely to wait for more evidence of falling inflation and a cooling economy before committing to any direction.
The I.M.F. projects that growth in the United States will slow from 2.1 percent in 2022 to 1.8 percent in 2023 and 1 percent in 2024. Consumption, which has remained strong, is expected to decline in the coming months as Americans draw down their savings and interest rates continue to rise.
The euro area is projected to experience only 0.9 percent growth this year, primarily due to a contraction in Germany, the largest economy in the region…
2023-07-25 08:00:09
Link from www.nytimes.com
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