International Monetary Fund (IMF) Managing Director Kristalina Georgieva said on Thursday that the global economy "appears headed for a soft landing" as inflation fell faster than expected in most regions. "Much rests on the near-term path for inflation and interest rates, particularly with recent data indicating persistence in inflation, asset prices and financial sector risks, fiscal policy, as well as geopolitical developments," she cautioned.
Georgieva also pointed out that the sequence of various shocks over recent years left many global economies with "reduced policy space and elevated debt levels." She said this is compounded by weak growth, which is held back by weak productivity, in part owing to misallocation of capital and labor, "while geoeconomic fragmentation threatens to undo decades of gains from cross-border economic integration." Commenting on the monetary policy in the United States, she said the IMF sees conditions to lower interest rates this year and remains "optimistic" that the Federal Reserve will decide to cut rates.
