A warning was issued by the International Monetary Fund ( ) on the fact that in many major economies it is retreating at a slower pace than expected, pointing to a potential risk to global growth by maintaining interest rates at higher levels ‘for an even longer period’. The IMF in an update of the World Economic Outlook released on Tuesday (16.07.2024), focused on persistent inflation of services, mainly due to higher wages. It also highlighted price pressures from trade and geopolitical tensions, especially in goods such as oil. “Inflation of service prices prevents the progress of deflation, which complicates normalization of monetary policy,” the IMF said. “Upside risks to inflation have thus increased, increasing prospects for higher, for even longer, interest rates”. Despite these warnings, the IMF considers that the global economy is still ready for a gentle landing. He raised growth prospects for next year by 0.1 percentage point to 3.3% and left the forecast for this year unchanged to 3.2%. However, “there have been notable developments beneath the surface,” chief economist Pierre-Olivier Gurinca said, in an accompanying post. After the best expected performance of the American economy, while China stalled, economic production during the first quarter converges in many countries, with Asia becoming again a main lever. The IMF revised its forecasts for China and India upwards, which account for almost half of global growth, and predicted that the eurozone is also ready to recover. The persistent inflation figures in the US earlier this year pushed the expectations of reductions from the Fed earlier in September when EKT may return to relaxation after an initial decline in June. The US’s highest interest rates for longer will also maintain upward pressures on the dollar, complicating inflation, interest rates, growth and debt in emerging markets. Guridsas also warned that state balance sheets are weak by coming out of the pandemic, which makes them vulnerable to new shock. He particularly targeted the US, writing that it is “concerned that a country like the US, full-time, maintains a fiscal stance that pushes the debt-to-GDP ratio steadily higher, with risks to both the domestic and global economy.” Upgraded by 0.4 percentage points of the IMF’s growth forecast for China, which increases it to 5% this year and 4.5% next year, was fueled by the recovery of private consumption and strong exports in the first quarter. The slowdown in the second quarter suggests prolonged issues surrounding consumer confidence and the real estate sector, Gurinchas said adding that the IMF has warned of this risk and now “seems to be implemented, perhaps”. The IMF sees growth in the world’s second largest economy slowing down to 3.3% by 2029. The IMF increased its forecast for India’s growth to 7%, also due to the best prospects for private consumption, especially in rural areas. The biggest downgrades of development concerned Saudi Arabia, which decreased by 0.9 a.m. to 1.7% amid reductions in oil production in coordination with OPEC+, and Argentina, which retreated by 0.7 a.m. to a 3.5% shrinking, as President Javier Milley puts in place severe cost cuts.