What to expect from inflation in 2024: IMF’s Kristalina Georgieva

Already in 2023, eye watering inflation rates were being brought under control in many parts of the world. In the US, for example, CPI inflation — which measures the change in the prices of a typical basket of goods and services — fell from 6.5% in December 2022 to 3.4% in December 2023.

According to Kristalina Georgieva, managing director of the International Monetary Fund (IMF), that positive trend looks set to continue in 2024. “The inflation rate is going down, on average,” she told the World Economic Forum in an interview during the Annual Meeting, which takes place in Davos, Switzerland, between 15-19 January, under the theme Rebuilding Trust.

Her comments are in line with the World Economic Forum’s most recent Chief Economists Outlook, which found that expectations for high inflation are being pared back across all regions.

While this will be welcome news for leaders everywhere, Georgieva pointed out that there are still regional discrepancies. “What we have now is a very diverse range. In some countries, the job is already done, and inflation is low enough for them to have an accommodative monetary policy. Brazil is one example. And in Asia, many countries did not have an inflation problem to start with.”

In other regions, policy-makers will still need to walk a tightrope. “Central banks should not tighten prematurely because then they may lose the victory that is now in their hands,” she explained. “But if they’re too slow, then they could throw cold water on the economy.” That’s in line with the advice the IMF gave in its October Economic Outlook, in which it warned there was “little margin for error on the policy front.”

So while the general trend is positive, Georgieva is calling on policy-makers in many countries to continue exercising caution, and to focus on the data. “The United States has a very tight labour market and wages are now going above inflation. What does that mean? People have more money to spend. And when they spend more, that puts pressure on prices upwards,” she explained. “So that last mile is very, very tricky.”