IMF Predicts Global Inflation Drop to 3.5% by 2025 Amidst Ongoing Risks

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Global inflation is set to ease, potentially providing relief to risk assets like cryptocurrencies, according to the International Monetary Fund (IMF). In its latest World Economic Outlook report, the IMF projects that inflation will fall to 3.5% by the end of 2025, down from a peak of 9.4% in 2022. Pierre-Olivier Gourinchas, IMF’s Chief Economist, noted that inflation is now close to central bank targets across many nations.

“The battle against inflation is almost won,” Gourinchas stated on October 22. “The global economy has shown resilience, and we expect growth to hold steady at 3.2% for the next two years.” This stabilization in inflation would bring potential benefits such as reduced living costs and lower interest rates, which could positively impact cryptocurrencies and tech stocks.

Lingering Uncertainty

Despite the encouraging inflation outlook, Gourinchas warned that geopolitical tensions and other global uncertainties could pose risks to the economy. “Escalating conflicts, especially in the Middle East, and the upcoming U.S. Presidential election create substantial uncertainty,” he added. These factors could disrupt commodity markets and slow economic recovery in certain regions.

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To address these challenges, the IMF called for a “policy triple pivot” aimed at stabilizing interest rates, reducing government spending, and implementing reforms to boost productivity. The report also stated that while inflation is declining without triggering a global recession, the overall growth outlook remains weak. The IMF noted that this growth is at its lowest level in decades, with emerging economies, particularly in Asia, expected to outperform other regions.

Potential for Slower Recovery in Developing Economies

The IMF warned that the projected slowdowns in major emerging and developing economies could prolong the income disparity between rich and poor nations. “Growth stuck in low gear could exacerbate income inequality within economies,” the report stated.

While the U.S. is expected to see the fastest rate of growth, advanced economies in Europe and several emerging markets face downward revisions in their forecasts due to rising global conflicts and commodity price volatility.

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Meanwhile, billionaire hedge fund manager Paul Tudor Jones offered a more cautious view. On the same day as the IMF report, Jones expressed concerns about the rising U.S. debt and predicted that inflation might worsen, despite current forecasts. Jones revealed he is long on Bitcoin and gold, noting that the U.S. risks financial instability if spending issues aren’t addressed soon.

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