MNI: IMF Cuts Global Growth Call on US, China, Sees Hot Prices

The IMF clipped its 2022 global growth forecast half a percentage point to 4.4% on stalled U.S. Build Back Better legislation, Fed rate hikes and China's real estate slowdown, while boosting its inflation call for advanced economies 1.6pp to 3.9% on pandemic supply bottlenecks.

Inflation in emerging and developing nations this year was lifted by a percentage point to 5.9% in Tuesday's World Economic Outlook update. Price gains in richer nations would be the fastest since 1991 according to the WEO database, though the IMF said inflation should slow to 2.1% next year.

U.S. economic growth was lowered 1.2pp to 4% this year, China's by 0.8pp to 4.8%, and Germany and Canada both by 0.8pp. Risks are to the downside in part because only 4% of low-income countries are fully vaccinated against Covid, the IMF reported.

“Monetary policy is at a critical juncture in most countries. Where inflation is broad based alongside a strong recovery, like in the U.S., or high inflation runs the risk of becoming entrenched, as in some emerging market and developing economies and advanced economies, extraordinary monetary policy support should be withdrawn,” First Deputy Managing Director Gita Gopinath wrote in a report.