Fears Shift from Inflation to Lackluster GrowthFearsShiftfromInflationtoLacklusterGrowth

Investors are gauging the prospects for monetary policy, the global economy, and US policies following next month’s elections, as the International Monetary Fund warned that downside risks now “dominate the outlook” despite good news on inflation. In a report published on Tuesday, the IMF estimated that headline inflation will ease to 3.5% by the end of 2025, down from an annual average of 5.8% this year. However, the organization expects the pace of economic growth to flatline, estimating that global GDP will settle at 3.2% both in 2024 and 2025. Even the US, an engine for growth in the post-pandemic recovery, is on track to see its economic expansion slow to 2.2% next year from 2.8% in 2024.

The combination of weaker inflation and growth paves the way for a “much-needed policy triple pivot,” according to the IMF, which identified rate cuts, stabilizing debt, and structural reforms that improve growth and productivity as three areas where policymakers can act. While major central banks are becoming more aligned on a dovish policy tilt, the world’s economies remain on divergent courses—particularly as geopolitical forces reshape global supply chains and domestic fiscal priorities. The second installment of PGIM’s 2024 Global Risk Report explores how geopolitics are changing the way investors construct their portfolios in the US, Europe, Asia-Pacific and Middle East.