The head of the International Monetary Fund on Monday warned that inflation was already picking up and the global economy could face a \u201cmuch worse outcome\u201d if the war in the Middle East drags into 2027 and oil prices hit around $125 per barrel.<\/p>\n
\nIMF Managing Director Kristalina Georgieva said the continuation of the war meant that the global lender’s \u201creference scenario\u201d assuming a short-lived conflict – which forecast a minor growth slowdown to 3.1% and a minor increase in prices to 4.4% – was no longer possible.<\/p>\n
\n\u201cThis scenario, with every day that passes, is further and further behind in the rear-view mirror,\u201d Georgieva said.<\/p>\n
\nThe continuation of the war, a forecast of \u2060an oil price around or above $100 per barrel, and rising inflationary pressures meant the IMF’s \u201cadverse scenario\u201d was already in effect, she said.<\/p>\n
\nLong-term inflation expectations remained anchored and financial conditions were not tightening, but that could change if the war continued, she told a conference hosted by the Milken Institute.<\/p>\n
\n\u201cNow, if this continues into 2027 and we have oil prices of $125 more or less, then we have to expect a much worse outcome,\u201d she said.<\/p>\n
\n\u201cThen we are going to see inflation climbing up and then inevitably, inflation expectations would start de-anchoring.\u201d<\/p>\n
\nThe IMF last month issued three scenarios for the global GDP growth path in 2026 and 2027 amid massive uncertainty over the war in the Middle East – the main \u201creference forecast,\u201d a middle \u201cadverse scenario\u201d and the much worse \u201csevere scenario.\u201d<\/p>\n
\nThe \u2060adverse scenario forecast global growth slowing to 2.5% in 2026 and headline inflation of 5.4%. The severe scenario forecast growth of just 2% and headline inflation of 5.8%.<\/p>\n
\nGeorgieva said the IMF was carefully tracking the slow-moving impact of the conflict on supply chains, with fertilizer already \u206030% to 40% more expensive, which would drive food prices up between 3% and 6%. Other industries could also be affected.<\/p>\n
\n\u201cWhat I want to stress is that is really serious,\u201d she said, expressing concern that many policymakers were still acting as \u2060if the crisis would end in a couple of months and were putting in place measures to cut the impact on consumers and business, which was keeping demand for oil high.<\/p>\n
\n\u201cDon’t throw gasoline on fire,\u201d she said. \u201cEverybody in this room knows that if your supply shrinks, your demand has to follow.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"The head of the International Monetary Fund on Monday warned that inflation was already picking up and the…\n","protected":false},"author":2,"featured_media":414126,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,219,111,139,69],"class_list":["post-414125","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-new-zealand","tag-newzealand","tag-nz"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/414125","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=414125"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/414125\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/414126"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=414125"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=414125"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=414125"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}