The International Monetary Fund (IMF) released its April World Economic Outlook on Tuesday, and its researchers didn’t hold back, warning that stubborn inflation could keep interest rates higher for longer, leading to a “hard landing” for the global economy. Their report contrasts with Goldman Sachs’ recent forecast that labor market rebalancing will enable a “soft landing” in the U.S.—where inflation is tamed without sparking a recession—as well as Barclays’ February projection for a “no-landing” scenario that involves resilient economic growth and higher inflation. And in some ways, the IMF’s new outlook disregards a genuinely constructive trend on inflation.
Many central banks worldwide have made progress in their fight against rising consumer prices in recent months. In the U.S., year-over-year inflation dropped from its 9.1% June peak to just 6% in February. And the European Union saw its key inflation measure sink to 6.9% last month, from 8.5% in February. But the IMF’s economists still believe inflation will be an issue for years to come. In developed economies, they forecast, it will take until after 2024 for consumer price increases to fall to central banks’ 2% target—and the situation will be even worse for developing nations.
