Economic Buzz: IMF says monetary policy must be carefully calibrated to country-specific circumstances to maintain price and financial stability

International Monetary Fund First Deputy Managing Director Gita Gopinath has stated that the fund’s April World Economic Outlook or WEO forecast projected global growth of 2.8 percent in 2025 and 3.0 percent in 2026, well below the historical average of 3.7 percent. This included significant downgrades to major economies such as the U.S. and China, owing to greater policy uncertainty, trade tensions, and softer demand momentum. Global headline inflation was projected to decline, but at a slower pace, reaching 4.3 percent in 2025 and 3.6 percent in 2026.

Since April, economic indicators reflect a complex backdrop shaped by trade tensions. We have seen strong evidence of front-loading ahead of tariff increases and some trade diversion. We have also seen an improvement in global financial conditions as select trade deals lowered average tariffs. On inflation, cooling demand and falling energy prices point to a continued decline, albeit with variation across countries. She noted that while the IMF will update its global forecast at the end of July, downside risks continue to dominate the outlook and uncertainty remains high.

Against this backdrop, policymakers should focus on resolving trade tensions and implementing macroeconomic policies to address underlying domestic imbalances. This includes restoring fiscal space and ensuring debt is on a sustainable path. To maintain price and financial stability, monetary policy must be carefully calibrated to country-specific circumstances and use clear and consistent communications. Central bank independence must be protected, Gopinath opined.

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