IMF Chief Economist Warns: Challenges May Prolong High Borrowing Costs
Pierre-Olivier Gourinchas, Chief Economist at the IMF has indicated that persistent challenges to disinflation in advanced economies might compel central banks, including the US Federal Reserve, to maintain higher borrowing costs for an extended period.
This could endanger overall economic growth, exert upward pressure on the dollar, and cause adverse spillovers to emerging and developing economies.
Gourinchas highlighted that empirical evidence, including research by the IMF, underscores the significant role of global ‘headline’ inflation shocks—primarily driven by energy and food prices—in the recent inflation surge and subsequent decline across numerous countries.
“The good news is that as headline shocks have diminished, inflation has decreased without triggering a recession,
” Gourinchas noted while presenting the latest global economic projections at the release of the July 2024 World Economic Outlook Update on Tuesday, July 16.
“However, the bad news is that while energy and food price inflation are nearing pre-pandemic levels in many countries, overall inflation remains elevated.”
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