Pace of U.S. Economic Growth May Decline Due to Inflation, Other Challenges

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Pace of U.S. Economic Growth May Decline Due to Inflation, Other Challenges

New York, NY, January 26, 2022-The pace of economic growth both in the U.S. and globally is likely to decline more sharply than previously expected, the International Monetary Fund says in its latest forecast, citing inflation, fallout from the Omicron variant and chronic supply-chain problems, reports the Wall Street Journal.

“The global economy will expand a predicted 4.4% this year, the IMF said Tuesday in its World Economic Outlook. That figure is down from an estimated 5.9% in 2021 and is a downgrade of one-half of a percentage point from its last projection in October.

“The decline will be steeper in the U.S.-4% in the coming year, a 1.2 percentage-point downgrade from the October estimate-the largest downgrade for any major country or major group of countries for which the IMF provides forecasts.

“In explaining the U.S. downgrade, the IMF’s Gita Gopinath cited the unexpected continuation of high inflation. She said that massive federal stimulus would be expected to lead to rising prices, but that persistent supply-chain disruptions are what propelled the numbers toward their highest level in a generation.

“‘You’d expect to see higher inflation but not the kinds of numbers we’re seeing at this point,’ said Ms. Gopinath, the IMF’s former chief economist who last week took on a new job as its deputy managing director.

“U.S. inflation topped 7% in December, according to an earlier Labor Department report, the highest reading since 1982.

“Ms. Gopinath said it may take time for the inflation and supply-chain situations to improve.

“‘The industry outlook is that supply disruptions will for the most part remain elevated until the middle of this year, and then gradually improve,’ she said.

“The U.S. outlook was also slashed because the Federal Reserve is planning to raise interest rates and because the economy is no longer likely to receive any boost from President Biden’s Build Back Better budget proposal which has stalled in Congress.”