Welcome to the Extreme Investor Network! Today, we are diving into the latest insights from the International Monetary Fund regarding inflation and interest rates.
The IMF recently issued a warning about increasing upside risks to inflation, which may impact the Federal Reserve’s decision to implement multiple interest rate cuts this year. According to the IMF’s World Economic Outlook update, global disinflation is slowing down, leading to potential challenges ahead. The United States, in particular, has seen an uptick in inflation, putting it behind other major economies in terms of quantitative easing efforts.
Traders are currently speculating about a Fed rate cut in September, with a 100% chance priced in for the upcoming meeting. However, IMF chief economist Pierre-Olivier Gourinchas believes that only one rate cut is appropriate for this year. He highlighted concerns about persistent services and wage inflation impacting the path towards lower inflation.
Despite a recent report showing a slower year-over-year growth in the consumer price index, Gourinchas suggested that the process towards lower inflation and rate cuts may take longer than expected. The IMF forecasts a slowdown in disinflation across advanced economies due to high services inflation and commodity prices.
In terms of the U.S. economy, the IMF has revised its growth outlook slightly downward to 2.6% for 2024. This adjustment is attributed to cooling consumption and slower-than-expected growth at the beginning of the year.
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