Visualizing Global Inflation Forecasts (2024-2026)

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May 3, 2024 Article/Editing: Graphics/Design:

Visualizing Global Inflation Forecasts (2024-2026)

Global inflation rates are gradually descending, but progress has been slow.

Today, the big question is if inflation will decline far enough to trigger easing monetary policy. So far, the Federal Reserve has held rates for nine months amid stronger than expected core inflation, which excludes volatile energy and food prices.

Yet looking further ahead, inflation forecasts from the International Monetary Fund (IMF) suggest that inflation will decline as price pressures ease, but the path of disinflation is not without its unknown risks.

This graphic shows global inflation forecasts, based on data from the April 2024 IMF World Economic Outlook.

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The IMF’s Inflation Outlook

Below, we show the IMF’s latest projections for global inflation rates through to 2026:

YearGlobal Inflation Rate (%)Advanced Economies
Inflation Rate (%)Emerging Market and
Developing Economies
Inflation Rate (%) 20193.51.45.1 20203.20.75.2 20214.73.15.9 20228.77.39.8 20236.84.68.3 20245.92.68.3 20254.52.06.2 20263.72.04.9

After hitting a peak of 8.7% in 2022, global inflation is projected to fall to 5.9% in 2024, reflecting promising inflation trends amid resilient global growth.

While inflation has largely declined due to falling energy and goods prices, persistently high services inflation poses challenges to mitigating price pressures. In addition, the IMF highlights the potential risk of an escalating conflict in the Middle East, which could lead to energy price shocks and higher shipping costs.

These developments could negatively affect inflation scenarios and prompt central banks to adopt tighter monetary policies. Overall, by 2026, global inflation is anticipated to decline to 3.7%—still notably above the 2% target set by several major economies.

Adding to this, we can see divergences in the path of inflation between advanced and emerging economies. While affluent nations are forecast to see inflation edge closer to the 2% target by 2026, emerging economies are projected to have inflation rates

Visualized: Interest Rate Forecasts for Advanced Economies

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50 mins ago

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May 1, 2024 Article/Editing: Graphics/Design:

Interest Rate Projections for Advanced Economies

While U.S. inflation cooled in the second half of last year, price pressures returned in 2024, leading investors to rethink how soon central bankers will cut rates.

Despite the recent increase, the interest rate forecast for many economies looks optimistic, thanks to subdued energy price shocks and abating supply chain disruptions. Still, short-term risks remain, including persistently high services inflation clouding the outlook.

This graphic shows the interest rate forecast for advanced economies, based on the International Monetary Fund’s (IMF) 2024 World Economic Outlook.

Get the Key Insights of the IMF’s World Economic Outlook

Want a visual breakdown of the insights from the IMF’s 2024 World Economic Outlook report?

This visual is part of a special dispatch of the key takeaways exclusively for VC+ members.

Get the full dispatch of charts by signing up to VC+.

A Closer Look at the IMF Interest Rate Forecast

Below, we show the projected path of interest rates based on the IMF’s latest data:

Federal ReserveBank of EnglandECBBank of Japan Q1 20245.4%4.0%-0.1%5.3% Q2 20245.3%3.9%0.0%5.3% Q3 20245.0%3.7%0.0%5.0% Q4 20244.7%3.4%0.1%4.8% Q1 20254.5%3.2%0.1%4.5% Q2 20254.3%3.0%0.1%4.3% Q3 20254.1%2.7%0.1%4.0% Q4 20253.9%2.7%0.2%3.8% Q1 20263.7%2.6%0.3%3.5% Q2 20263.5%2.6%0.4%3.5% Q3 20263.3%2.6%0.4%3.5% Q4 20263.1%2.6%0.6%3.5% Q1 20272.9%2.6%0.6%3.5% Q2 20272.9%2.6%0.6%3.5% Q3 20272.9%2.6%0.6%3.5% Q4 20272.9%2.6%0.6%3.5% Q1 20282.9%2.6%0.6%3.5% Q2 20282.9%2.6%0.6%3.5% Q3 20282.9%2.6%0.6%3.5% Q4 20282.9%2.6%0.6%3.5%

As we can see, the U.S. is forecast to see its first rate cut in the second quarter of 2024.

Broadly speaking, rates will be cut very gradually, with two additional rate cuts anticipated for this year. By 2027, interest rates are projected to fall to 2.9% after a series of moderate rate cuts as inflation dissipates.

Like the U.S., the European Central Bank is forecast to cut rates in the second quarter of 2024, with rates set to fall to 2.6% by 2026. While inflation has cooled at a faster rate across Europe compared to the U.S., GDP growth is also projected to be more muted. This year, the IMF projects that