The International Monetary Fund (IMF) expects the U.S. economy to experience high inflation. It would be for at least another year or two. “I would be careful when looking at a data point for the United States,” warned the IMF’s first deputy managing director, Gita Gopinath.
IMF on the US Economy and Global Inflation
The first deputy managing director of the International Monetary Fund (IMF), Gita Gopinath, spoke about global inflation and the U.S. economy in an interview with Bloomberg on Friday in Jackson Hole, Wyoming.
Responding to a question about whether global inflation has peaked, he said: “It’s too early to say. Yes, we have inflation almost everywhere. There are important exceptions, such as China and Japan, but everywhere we have high levels of inflation.” The IMF executive added:
“There are global factors like energy prices and food prices that are driving it. There are also stickier components of inflation that are high.”
On Friday, Federal Reserve Chairman Jerome Powell emphasized in his annual speech in Jackson Hole. The central bank will use its tools “forcefully” to attack inflation, which is still near its highest level in more than 40 years. He expects the Fed to continue raising interest rates in a way that causes some pain to the U.S. economy.
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Commenting on Powell’s speech, Gopinath opined, “What was great was that he came out firm and determined to reduce inflation to the target. It’s making sure that inflation expectations don’t unwind. I think, is exactly what it takes to make sure that the economic health of the world is in a good place in the medium to long term.”
On Friday, the latest U.S. personal consumption expenditure (PCE) inflation data was released. The PCE price index showed a year-on-year increase of 6.3% in July, down from 6.8% in June. The PCE is the Federal Reserve’s preferred measure of inflation.
“Now, I would be careful when looking at a data point for the United States,” Gopinath emphasized.
“I think last year, around the same time, there was a good reading of inflation and everyone thought we were on track for inflation to come down. And then October inflation rose again. So, I think you have to be very careful with an inflation rating,” the IMF’s first deputy managing director said, explaining:
“We’re in a period where inflation is likely to be high for a while, at least for another year or two.”
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