IMF declares victory over inflation, boosts US economic outlook

International Monetary Fund (IMF) officials sounded a death knell for the post-pandemic inflation Tuesday and raised projections for U.S. economic performance, placing the U.S. at the center of the global growth outlook among advanced economies.

The IMF sees real gross domestic product (GDP) increasing by 2.8 percent this year, up from a forecast of 2.6 percent made in July. For 2025, the IMF expects growth of 2.2 percent, up from an earlier expectation of 1.9 percent. 

“In most countries, inflation is now hovering close to central bank targets,” IMF research director Pierre-Olivier Gourinchas said at a press conference Tuesday.

Inflation has eased toward the Federal Reserve’s target rate of a 2 percent annual increase since hitting a peak of 9 percent in mid-2022. That descent occurred without a recession, pretty much achieving the Fed’s goal of a “soft landing” for the economy — something IMF officials recognized Tuesday.

Gourinchas attributed easing inflation more to transitory economic factors — namely the renormalization of supply and the absorption of economic rescue measures — than to the Fed’s interest rate hikes, but said that monetary policy helped to keep price expectations anchored.

“The decline in inflation without a global recession is a major achievement,” he said. “Much of that disinflation can be attributed to the unwinding of the unique combination of supply and demand shocks that caused the inflation in the first place, together with improvements in labor supply due to immigration.”

The IMF sees the trend of lower inflation continuing, particularly with regard to production and services prices, as opposed to the more volatile commodity prices.

“The decline in global inflation in 2024 and 2025 reflects a broad-based decrease in core inflation, unlike the situation in 2023, when headline inflation fell mainly because of lower fuel prices. Core inflation is expected to drop by 1.3 percentage points in 2024,” IMF economists said in the world economic outlook report.

The international lender also warned of slower global growth in coming years, pointing to issues with the Chinese property market, demographic changes, lower cross-border investment and various fiscal policies at the national level. Wars and geopolitical instability were also a top concern.

“Structural challenges such as population aging, weak investment, and historically low total factor productivity growth are still holding back global growth,” the report said.

Recent U.S. economic data has been robust despite some concerns about a contraction by next year. Unemployment has ticked down for two months in a row and is near historical lows even as prices have descended toward the Fed’s 2-percent annual target.

The final estimate for second quarter GDP growth recorded by the Commerce Department clocked in at 3 percent in September.

Minutes of the Fed’s latest rate setting committee meeting also showed officials feeling confident about the condition of the economy.