① In its latest “World Economic Outlook”, the IMF predicts that the global economy will grow by 3.2% this year, slightly higher than the 3.1% forecast in January, which is comparable to the 3.2% economic growth rate last year; ② The IMF predicts that by the fourth quarter of this year, the Fed's policy interest rate will drop from the current 5.25-5.5% range to 4.75%.
Financial Services Association, April 16 (Editor Xia Junxiong) On Tuesday (April 16) local time, the International Monetary Fund (IMF) raised its expectations for the global economy this year and predicts that as inflation falls, central banks around the world will begin cutting interest rates in the second half of this year.
The IMF predicts in its latest “World Economic Outlook” that the global economy will grow by 3.2% this year, a slight increase from the 3.1% forecast in January, which is comparable to the 3.2% economic growth rate last year. The IMF also expects the global economy to grow by 3.2% for the third year in a row in 2025.
The IMF said in its report that part of the reason for the increase in global economic growth this year is that the resilience of the US economy has exceeded expectations. The agency expects the US economy to grow by 2.7% this year, higher than the 2.1% forecast in January this year, and higher than the 2.5% economic growth rate in 2023.
By contrast, the Eurozone's recovery has been much slower, reflecting the effects of rising energy costs and weak productivity growth. The IMF expects the Eurozone economy to grow by 0.8% this year, up from 0.4% last year, and by 1.5% next year.
Although high inflation remains a major obstacle to global economic growth, the IMF expects the global inflation rate to fall from 6.8% last year to 5.4% in 2024, and further to 4.5% next year.
Factors such as rising interest rates, a weak job market, and a relaxed environment brought about by rising energy prices contributed to the decline in inflation.
Continued decline in inflation means that the central bank is expected to relax monetary policy. The ECB is expected to start cutting interest rates for the first time in June by major global central banks. However, the degree of uncertainty about the Fed's policy is higher. As US inflation data is higher than expected and the economy is unexpectedly strong, investors have delayed estimating when the Fed will cut interest rates.
The IMF expects that by the fourth quarter of this year, the Federal Reserve's policy interest rate will drop from the current range of 5.25-5.5% to 4.75%. This means that the Federal Reserve will cut interest rates by 25 basis points three times this year, in line with the median expectations of Federal Reserve officials at the March interest rate meeting.
In contrast, investors currently expect the Federal Reserve to cut interest rates only once or twice this year, and the time for the first rate cut will be postponed until July.
However, the IMF's inflation forecast was made before Iran attacked Israel. The agency warned in its report that any escalation of the Middle East conflict could change the trajectory of economic development.
Editor/Somer