IMF: US Economy Will Have High Inflation for Another Year or Two

By: Dickson Arinze

IMF: US Economy Will Have High Inflation for Another Year or Two

August 30, 2022 6:04 AM

The U.S. economy will likely continue to face high inflation for at least another year or two, according to the International Monetary Fund (IMF). IMF First Deputy Managing Director Gita Gopinath advised caution when looking at just one data point for the United States.


Gita Gopinath, the first deputy managing director of the International Monetary Fund (IMF), spoke with Bloomberg on Friday in Jackson Hole, Wyoming, on global inflation and the American economy.


When asked if she believed that global inflation had peaked, she replied, "I think it's too early to say. Yes, inflation is a common occurrence today. We have high levels of inflation everywhere else, with notable outliers like China and Japan. The IMF official continued:


"Although there are certain international variables, such as rising energy and food prices, that are causing it, there are also other, rather more persistent, components."


In his yearly speech in Jackson Hole on Friday, Federal Reserve Chairman Jerome Powell emphasized that the central bank will use its resources "forcefully" to combat inflation, which is currently hovering around its peak point in over 40 years. He believes the Federal Reserve will continue to raise interest rates, which will hurt the U.S. economy.


Gopinath said of Powell's address, "What was excellent was that he came out as being firm and resolute about bringing inflation down to goal, making sure inflation expectations don't get de-anchored and that, I think, is exactly what you require to make sure that the economic strength of the world is in a healthy position over the medium to long term."


The newest personal consumption expenditures (PCE) inflation numbers for the United States were released on Friday. In July, the PCE price index showed an increase of 6.3% over the same period last year, down from 6.8% in June. The Federal Reserve's favored method of measuring inflation is the PCE.


Now, Gopinath cautioned, "I would be hesitant about looking at one data point for the U.S.


Around this time last year, we also saw a positive inflation reading, leading many to believe that prices would begin to decline. Inflation then increased once more in October. Therefore, the first deputy managing director of the IMF noted, "I think one needs to be very skeptical about one inflation rating," going on to explain:


"We are currently in a time where inflation will probably continue to be high for at least another year or two."