Asleep at the wheel at the IMF

By Desmond Lachman

The International Monetary Fund (IMF), along with many other macroeconomic forecasters, does not have a good forecasting record.

It was caught flatfooted both by the 2008–2009 Great Recession and by the 2010 European sovereign debt crisis. More recently, it singularly failed to anticipate last year’s US inflation surge to a 40-year high. Worse yet, it failed to warn US policymakers about the inflationary dangers of combining an ultra-easy monetary policy with the largest peacetime budget stimulus on record.

Judging by the IMF’s latest World Economic Outlook update, it would seem to be setting itself up for another major forecasting error. It is doing so by only marginally downgrading its earlier world economic growth forecast for 2022 to around 4.5 percent. It is also doing so by downplaying the very real risk that the shift to tighter US and European monetary policies to contain inflation will burst today’s global “everything” asset and credit market bubbles.

 
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Πηγή: aei.org