Washington — The International Monetary Fund said Wednesday that headline consumer price inflation should peak this fall and retreat to pre-pandemic levels by mid-2022, but inflation surges due to shortages are more pronounced. There remains the risk that it may prove persistent and unfixed expectations.
The IMF’s baseline forecast for advanced economies shows that headline inflation peaks at 3.6% in the fall of 2021 and drops to about 2% by mid-2022. In emerging markets and developing countries, inflation will drop to about 4% next year after peaking at 6.8% this fall.
The Staff Analysis was released as a chapter on the analysis of the global economic outlook entitled “Fear of Inflation”.
In a report, the IMF said, “Rising housing prices and prolonged supply shortages in developed and developing countries, food price pressures in emerging markets and continued depreciation of currencies will drive inflation longer. We may continue. “
Fund staff ran simulations to include long-term supply disruptions in certain sectors and significant fluctuations in commodity prices that could keep headline inflation “significantly above baseline.” rice field. Adding a temporary release of inflation expectations, this simulation shows “higher, more sustained and volatile inflation.”
The IMF said recent headline inflation has been driven by stagnant demand and savings backed by fiscal and monetary stimulus. Commodity prices that rise rapidly. Insufficient input and supply chain disruption.
Low-income countries have been hit hard by a 40% rise in global food prices since the outbreak of the pandemic.
In some developed countries, including the United States, wages have risen significantly in sectors hit hard by the COVID-19 pandemic, such as leisure, hospitality and retail.
However, the chapter states that wage growth was accompanied by a decrease in time and there were few signs that wages in the economy as a whole would accelerate until mid-2021.
According to the IMF, inflation expectations tend to be firmly anchored in countries with independent central banks that have reliable, well-informed monetary policy. Accelerated inflation, especially in emerging markets, is often associated with sharp exchange rate declines. According to this chapter, developed countries often have large budget deficits before that.
During the COVID-19 pandemic, the IMF chapter argues that the anchor of inflation expectations is “relatively stable so far during the COVID-19 pandemic.”