IMF Warns of Economic Growth Hurdles and ‘Tepid Twenties’

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Growth With a Catch

The U.S. economy has been surprisingly strong in the face of high inflation, boosting the global economy to outperform expectations. But there may be clouds gathering on the horizon.

The International Monetary Fund (IMF) plans to increase its global growth forecasts in its coming projections. But there’s a catch. It also issued a firm warning that failing to resolve inflation and high debt levels could send the world into a sluggish decade – the “Tepid Twenties.”

Good News and Bad News

Let’s start with the good news. The IMF’s January projections showed 3.1% global economic growth in 2024 and 3.2% in 2025. In the revised projections due April 16th, the IMF is expected to marginally raise those estimates, thanks to strong consumer spending and investment, as well as improving supply chain dynamics.

However, alongside this rosy outlook, the IMF warned many countries still face elevated inflation and debt levels, which could pose a risk to the global economy in coming years. Case in point, U.S. consumer price inflation rose 3.5% year-over-year in March, well above the Federal Reserve’s 2% target.

Policy Solutions

IMF Managing Director Kristalina Georgieva cautioned central banks to avoid premature interest rate cuts and loosening their monetary policy too soon. Else, a potential resurgence of inflation could knock economic growth, and the much-discussed soft landing could be jeopardized. And economic growth is especially needed to reduce the relative debt loads governments are shouldering, too. So you see, the soft landing discussion never stopped.

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