IMF says global fight against inflation is 'almost won' but warns of rising risks

Much of the world has managed to successfully lower inflation and engineer an economic soft landing, avoiding recession, but faces rising geopolitical risks and weaker long-term growth prospects, according to the International Monetary Fund. 

Global headline inflation will fall to 3.5% on an annual basis by the end of 2025, from an average 5.8% in 2024, the agency said in its World Economic Outlook released Tuesday. Inflation peaked at a year-over-year rate of 9.4% in the third quarter of 2022. The year-end 2025 rate is slightly below the average annual rise in prices in the two decades before the Covid-19 pandemic. 

"The global battle against inflation is almost won," the IMF report trumpeted, even as it called for "a policy triple pivot" to address interest rates, government spending, and reforms and investment to boost productivity.

"Despite the good news on inflation, downside risks are increasing and now dominate the outlook," said the IMF's chief economist, Pierre-Olivier Gourinchas. Now that inflation is headed in the right direction, global policymakers face a new challenge stemming from the rate of growth in the world economy, the IMF warned.

The fund kept its global growth estimate at 3.2% for 2024 and 2025 — which it called "stable yet underwhelming." The United States is now forecast to see faster growth, and strong expansions are also likely in emerging Asian economies as a result of robust artificial intelligence-related investments. But the IMF lowered its outlook for other advanced economies — notably the largest European nations — as well as several emerging markets, blaming intensifying global conflicts and ensuing risk to commodity prices. 

The Washington-based IMF, with 190 member countries, said in its