Inflation
(Photo: Edwin Tan by Getty Images)
Inflation's Complicated Outlook
From meat to metals, it's hard to turn anywhere these days without seeing the mention of inflation and whether it's a passing trend or here to stay. The threat of the pandemic still hangs over the global economy and mismatches between supply and demand continue.
In most economies, inflation pressures have increased with signs that inflation has become more broad-based. Rising commodity prices are driving headline inflation and weather events have impacted agriculture and added pressure to food prices (see our Chart of the Week below on food prices in Latin America).
"With interruptions of supply chains, inflation has become a more troubling phenomenon. Yet, at this stage, we still see this disconnect between demand and supply as the key reason for inflation, which gives us hope that inflation will likely recede next year," IMF Managing Director Kristalina Georgieva said this week.
A 'sticky' situation: Uncertainty, though, reigns supreme. If supply disruptions continue or inflation expectations become de-anchored, inflation may become more "sticky," Georgieva said. For now, inflation expectations generally remain anchored in most economies.
Falling and rising:Â In the United States, core inflation accelerated in October after decelerating in July and August.Â
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"Lot's going on with elevated demand, supply disruptions & pandemic oddities including the strong demand for goods relative to services," IMF Chief Economist Gita Gopinath tweeted recently. "This will be a bumpy ride with complex policy trade-offs."
What role for the IMF? The IMF is encouraging central banks to stay vigilant to inflationary pressures. The Fund is paying close attention, thinking through scenarios of monetary and fiscal policy in advanced economies, and possible spillover impacts on emerging and developing economies.
Additional Reading:Â Revisit recent IMF research on inflation as part of our latest World Economic Outlook. Or listen to a recent podcast with the IMF's Prachi Mishra where she talks about how we're navigating uncharted territory.
Automation
(Image: ELENABS/iStock BY Getty Images)
The use of robots and more automated work processes can cause inequality. These trends can also increase growth and productivity. In a new blog, the IMF's Nikolay Gueorguiev and Ryota Nakatani dig into recent research explaining how fiscal policy--government spending and taxes--can have positive short- and medium-term effects on growth but may weigh on long-term growth.
One key takeaway: Policymakers should consider both the short- and long-run benefits and costs of policies. What performs best in the short term can turn costly in the long term. This does not automatically invalidate such policies—societal preferences will have the last word—but needs to be taken into account.
Read the Blog
Emerging Markets
(Photo: IMF Photo)
For the first time since the start of the pandemic, monthly credit ratings upgrades have outnumbered downgrades in emerging and developing economies in October. The trend, reported recently by the IMF's Rohit Goel and Evan Papageorgiou in the IMF Global Markets Analysis, is attributed to new allocations of Special Drawing Rights, optimism for more financing arrangements, and a reticent economic recovery.
Low-income countries and commodity exporters, such as Angola, CĂ´te d'Ivoire, Benin, Kazakhstan, and Gabon, have net upgrades this year, reflecting financing arrangements and a commodity rally that has improved the outlook on revenues. Still, there remain very significant debt and fiscal sustainability concerns for many economies. Emerging market ratings, on average, have also continued to decline this year.
F&D Magazine
(Photo: IMF Photo)
Information on social mobility in African countries was once relatively scarce, but a new data set paints a continent-wide picture. In a new F&D online exclusive, the IMF's Rasmane Ouedraogo and Nicolas Syrichas describe what they found after studying a data set of 72 million individuals since 1920. The key finding: economic opportunities measured by literacy rates have improved over time.
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