Inflation will fall further in 2024, but it has not been completely defeated: IMF

This would create the conditions for the central banks of the main advanced economies to begin cutting rates in the second half of the year, although the pace and timing would vary, he said at an event organized by the Atlantic Council think tank.

“In this final stretch, it is doubly important for central banks to maintain their independence,” Georgieva said, urging policymakers to resist calls for premature rate cuts when necessary.

“A premature relaxation could give rise to new inflationary surprises that could even make necessary a new round of monetary tightening. On the other hand, a delay that is too long could spell a bucket of cold water for economic activity,” he said.

Georgieva said next week's World Economic Outlook report will show slightly stronger global growth due to strong activity in the United States and many emerging market economies, but she offered no concrete new forecasts.

He said the resilience of the global economy was being helped by strong labor markets and labor force expansion, strong household consumption and easing supply chain problems, but he said there was still there were “a lot of things to worry about.”

“The global environment has become more challenging. Geopolitical tensions increase the risks of fragmentation… and, as we have learned in recent years, we operate in a world where we must expect the unexpected,” Georgieva said.

The “Lukewarm '20s”

He said global activity was weak by historical standards and growth prospects had been slowing since the 2008-2009 financial crisis. The global production loss since the start of the Covid-19 pandemic in 2020 was $3.3 trillion, disproportionately affecting the most vulnerable countries.

Georgieva said the United States had seen the strongest rebound among advanced economies, helped by rising productivity growth. The recovery of activity in the euro zone was more gradual, due to the persistent impact of high energy prices and lower productivity growth.