April 11 (UPI) -- Though inflationary pressures are easing in the world's leading economies, the International Monetary Fund said Tuesday that levels will remain above-target until at least 2025.
Inflation in the U.S. economy, the world's largest, is running at 6% over the 12-month period ending in February, well below levels near 10% last year, but still above the 2% target rate for the Federal Reserve.
The IMF said in its annual report on the health of the global economy expects global inflation to decline from 8.7% last year to 7% for 2023, due in part to the dwindling war premium that supported the price of crude oil and natural gas last year.
So-called core inflation, which strips out more volatile items such as energy and food prices, should decline at a slower rate, however.
Related
"Inflation's return to target is unlikely before 2025 in most cases," the IMF stated.
An update on inflation to March in the U.S. economy is due Wednesday.
The IMF, meanwhile, expressed concern about the health of the global financial sector following the collapse of Silicon Valley Bank in California and the forced marriage of Swiss investment bank UBS and struggling Credit Suisse.
The global bank suggested that successive rate hikes devalued some of the long-term assets such as bonds for financial institutions, leading to big losses on their balance sheets.
"Side effects from the fast rise in policy rates are becoming apparent, as banking sector vulnerabilities have come into focus and fears of contagion have risen across the broader financial sector, including non-bank financial institutions," the IMF's report read.
IMF Managing Director Kristalina Georgieva warned last week that the outlook for global economic growth will be weak, with just 3% growth in the next five years.
"We project global growth to remain around 3% over the next five years -- our lowest medium-term growth forecast since 1990, and well below the average of 3.8% from the past two decades," she said.
The IMF warned in January that a third of the world will be in recession in 2023.
