Advanced economies likely to face moderate near-term inflation, emerging markets seem to be more sensitive, organization says
The International Monetary Fund (IMF) on Wednesday said that higher inflation will likely continue in the coming months, but it would return to pre-pandemic levels by mid-2022.
“The economic recovery has fueled a rapid acceleration in inflation this year for advanced and emerging market economies, driven by firming demand, supply shortages, and rapidly rising commodity prices,” said an IMF report, titled Inflation Scares in an Uncharted Recovery.
While some economists believe government stimulus may push unemployment rates low enough to raise wages and overheat economies, others think that inflation pressures will be transitory since a one time jump in expenditures will ultimately fade.
“Advanced economies are likely to face moderate near-term inflation pressure, with the impact softening over time,” the report said, adding “inflation for emerging markets instead seems to be more sensitive to the inclusion of the pandemic period in the estimation sample.”
The IMF stressed that the coronavirus pandemic has caused large price movements in some sectors, especially in food, transportation, clothing, and communications. It pointed out price swings in fuel, food, and housing the three largest components of consumption baskets on average.
The organization urged policymakers to remain patient in supporting economic recovery, being ready to act quickly, and establish sound monetary frameworks.