IMF's Georgieva forecasts soft landing, expects rate cuts

Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), expressed considerable confidence in the global economy's trajectory, foreseeing a "soft landing" after a period marked by substantial interest rate increases. Georgieva's statements come against the backdrop of some of the most pronounced interest rate hikes seen in decades.

"We are very confident that the world economy is now poised for this soft landing we have been dreaming for," Georgieva said at the World Governments Summit in Dubai, highlighting the expectation surrounding the potential easing of interest rates around mid-year.

With a focus on leading economies such as the United States, Georgieva indicated her expectation of interest rates aligning with the inflationary trends observed over the past year. The sentiment suggests a shift towards monetary policies aimed at managing inflation while supporting economic growth.

However, Georgieva issued a cautionary note, urging vigilance in light of the ongoing COVID-19 pandemic and geopolitical tensions. Specifically, she underscored the potential repercussions of prolonged conflicts, citing the impact of sustained hostilities between Israel and Hamas on global economies.

"I fear most a longevity of the conflict because (if) it goes on and on the risk of spillovers go up," Georgieva warned, stressing the need to mitigate potential disruptions. She pointed to recent incidents, such as attacks on ships in the Red Sea, as examples of events that could exacerbate economic uncertainties.

Georgieva's remarks underscore the delicate balancing act faced by policymakers as they navigate evolving economic conditions amid geopolitical challenges, signalling a cautious optimism tempered by a recognition of potential risks on the horizon.

(With Reuters inputs)