By David Lawder
WASHINGTON (Reuters) -The International Monetary Fund sees a mixed inflation picture globally as companies in the U.S. and other tariff-raising countries have so far absorbed much of the higher duties, while demand remains suppressed in major exporting countries like China, IMF spokesperson Julie Kozack said on Thursday.
Kozack told a regular press briefing that the global economy has shown resilience in the face of uncertainty over tariffs as the IMF and World Bank Group prepare for their annual meetings in Washington later this month.
“We see global growth in the first half of the year having held steady, but we are starting to see signs of a slowdown globally now,” Kozack said. “With respect to inflation, what we see globally is a bit of a mixed picture.”
She said that while pass-through of some tariffs to price hikes is helping to push up core inflation in the U.S., headline inflation was rising faster in Britain, Australia and India. But inflation pressures are “very muted” in China and some other Asian countries, reflecting tariffs’ impact on demand for their exports.
“We do see firms absorbing some of the tariff impact, so that seems to be part of the contributing factor to the fact that we’ve seen relatively limited impact so far on inflation in the U.S.,” Kozack said. “How long that will last, I think, is a question.”
She said the IMF’s next World Economic Outlook due on October 14 will seek to address the question of tariff impacts on the U.S. economy and inflation, as will the IMF’s annual “Article IV” review of U.S. economic policies due in November.
Kozack said that a softening U.S. labor market made it appropriate for the Federal Reserve to reduce its policy interest rate at its September meeting, as inflation is on a path toward the Fed target. But she added that inflation was subject to upside risks, so the Fed must keep a close watch on incoming data for inflationary pressures as it considers its next rate decision.
Asked about the economic impact of the partial U.S. government shutdown that started on Wednesday, Kozack said that the IMF was monitoring these developments and still formulating its assessment.
“That impact will depend very much on the duration of the shutdown and the modalities of the shutdown, and we certainly hope that a compromise can be found to ensure that the federal government remains fully funded,” Kozack added.
(Reporting by David Lawder in Washington, Editing by Franklin Paul and Matthew Lewis)
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