IMF forecasts cut in inflation in 2010
Azerbaijan, Baku, July 9 / Trend , N.Ismayilova/
Inflation pressures have continued to ease with the continued weakness of the global economy in the second quarter of 2009, the World Economic Outlook (WEO) by the International Monetary Fund (IMF) said.
The report says, year-over-year inflation moderated to 1.7 percent in May, down from around 6 percent one year earlier. In the advanced economies, headline inflation fell below zero percent in May as oil prices remained far below levels one year earlier, despite their recent pickup. Core inflation is still running around 1Ѕ percent, down from 2 percent one year earlier. Similarly, headline and core inflation in the emerging markets have moderated, falling below 4Ѕ percent and to around 1 percent in May, respectively. However, developments have been uneven, with inflation falling more in China and the Middle East than elsewhere.
Despite upward pressure from recovering commodity prices, global inflation is expected to remain subdued through 2010, held back by significant excess capacity. Risks for sustained deflation are small, as core inflation and inflation expectations in most major economies are still holding in the 1-2 percent range. In the advanced economies, potential output growth rates have taken a hit, with activity in the housing and financial sectors slumping and a need for a reallocation of resources toward other sectors. Nonetheless, the weakness of demand implies a noticeable widening of excess capacity that will keep inflation close to zero percent in 2009.
Inflation rates have been marked up by about Ѕ percentage point for 2010 from the April WEO forecast, owing to somewhat stronger demand and commodity prices than earlier projected.
Unemployment rates will reach double digits in some countries, holding back wages and household spending and presenting significant policy challenges. In the emerging economies, stronger disinflationary forces in some regions have prompted modest markdowns to the April projections for inflation, notwithstanding the upward revisions to output growth.