Despite inflation that has been coming down notably from previous years' highs, the International Monetary Fund doesn’t expect consumer price increases in the United States to return to the desired levels of around 2 percent before 2027.
According to its latest World Economic Outlook, the IMF predicts global inflation to reach 4.3 percent this year, down from 8.6 percent in 2022 and 6.6 percent in 2023. However, projected inflation for 2025 in the G7 and the Euro area is already a lot lower, at a respective 2.6 percent and 2.1 percent. In the United States, the organization is expecting inflation of 3.0 percent this year as some "tentative signs of pass-through from tariffs and a weaker dollar" manifest. “While global inflation continues to decline, the latest price data suggests that inflation pressures are building gradually in the US. Overall, US import prices in dollars have remained largely unchanged or even increased this year, suggesting that the cost of tariffs will be borne by US retailers, and eventually customers as firms start to pass through higher costs into their prices”, the IMF finds.
Expectations play a crucial role in managing inflation dynamics, as expectations of future inflation influence price- and wage-setting processes which then feed into current inflation rates. And while long-term inflation expectations have remained well-anchored near the goal of two percent, short-term expectations have risen significantly since 2022, including in the United States.
