The International Monetary Fund (IMF) on Tuesday raised its inflation forecast for next year to 5.8 percent while slashing the global growth forecast to 2.9 percent, down 0.1 percent from its previous outlook in July. This is below the average of 3.8 percent for the two decades before the pandemic. However, the IMF”s forecast for 2023 remains unchanged at 3.1 percent.

The IMF raised the global inflation forecast to 5.8 percent for next year in its World Economic Outlook release. Previously, the forecast was 5.2 percent. In the wake of high inflationary pressures, the IMF has come up with a lower economic growth outlook for 2024.

The release sees inflation sustaining itself above central bank targets until 2025 in most countries. The IMF”s comments on inflation and growth have been eagerly awaited, as they are expected to influence the policies of central banks. The annual meetings of the International Monetary Fund (IMF) and the World Bank are being held this week in Marrakech, Morocco.

This is the first time in 50 years that these meetings are being held in Africa, and they are much-awaited. However, the event is taking place in the aftermath of a deadly weekend assault on Israel by Hamas, which has revived fears of a wider conflict in the Middle East. The Middle East is home to almost a third of the global supply of oil, and the attacks have caused global uncertainty to rise.

This has added another factor to an already uncertain period. Central banks have already made several interest rate hikes to curb inflation, which reached an unprecedented level of 8.7 percent globally in 2022. This is the highest level since the mid-1990s.

“Monetary policy needs to remain tight in most places until inflation is durably coming down towards targets,” Pierre-Olivier Gourinchas, the IMF”s chief economist, said in a briefing with reporters. “We”re not quite there.”

Inflation has spread around the world on account of factors such as supply-side disruptions stemming from the global Russia-Ukraine war and the dovish stance of central banks during the COVID-19 pandemic years.