IMF warns persistent inflation may keep interest rates high for longer

Posted on July 19, 2024   |  

The IMF warns that ongoing inflation may result in higher interest rates for longer, increasing global financial and fiscal risks.

High service costs, such as haircuts, hotels, and restaurants, along with rising trade tensions, are driving inflation and may keep interest rates elevated.

Despite UK inflation reaching the Bank of England's 2% target in May, the bank did not cut rates due to higher-than-expected services inflation.

The IMF forecasts global inflation to decrease to 5.9% this year from 6.7% last year, in line with its April prediction.

The US and the EU have recently raised tariffs on Chinese electric cars and other products to protect local industries from low-cost imports.

The IMF expects global economic growth to remain at 3.2% this year but has slightly reduced its US growth forecast to 2.6%.

The eurozone economy is predicted to grow by 0.9%, a small increase from the IMF's earlier forecast.

The IMF has raised its 2024 growth predictions for India and China, now expecting 7% and 5% growth rates, respectively, accounting for half of global expansion.