The International Monetary Fund warned the global economy could soon fall into a recession amid a confluence of threats including inflation and the war in Ukraine.
Thru the Cycle President John Lonski joins Dagen McDowell to discuss the possibility of a recession in the coming months, predicting the end of Federal Reserve rate hikes could be coming soon.
The Washington-based institution said in its latest World Economic Outlook that global gross domestic product will grow by 3.2% this year – a 0.4 percentage point drop from its April estimate. The IMF expects global growth to decelerate further to 2.9% next year, which is a 0.7 percentage point decline from its previous estimate. By comparison, the economy grew by 6.1% last year following the brief but extremely severe recession in 2020.
"The outlook has darkened significantly since April," Pierre-Olivier Gourinchas, the IMF’s chief economist, said in a blog accompanying the latest report. "The world may soon be teetering on the edge of a global recession, only two years after the last one."Inflation has climbed more quickly than the IMF expected and broadened throughout the economy. The fund now projects that consumer prices will accelerate even further this year – hitting 6.6% in wealthy countries and 9.
Rapid price growth has forced the Federal Reserve to raise interest rates at the fastest pace in three decade as it tries to catch up with runaway inflation. Central bank policymakers already approved a 75-basis point rate hike in June – the first since 1994 – and are expected to raise the benchmark federal funds rate by another three-quarter percentage point on Wednesday.
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