News US Economy News IMF Sees Inflation in Check for Now but Warns of Risks By Medora Lee Medora Lee Medora Lee began covering the financial markets in 1992 and has interviewed U.S. Treasury secretaries and CEOs of Fortune 500 companies. Her work at outlets including Reuters, theStreet.com, and Forbes.com schooled her in stocks, commodities, and bonds and now she translates Wall Street for Main Street at The Balance. learn about our editorial policies Published on July 27, 2021 Fact checked by Glenn Hunter Fact checked by Glenn Hunter Glenn Hunter has written or edited thousands of articles over four decades, including on the savings and loan and subprime mortgage crises. Before bringing topics like tax policy and mortgage trends to life at The Balance, he edited for the Dallas Business Journal and freelanced for Fortune and the Los Angeles Times. learn about our editorial policies Share Tweet Pin Email Photo: PeopleImages / Getty Images Spikes in inflation in advanced economies will probably subside next year, but such an outcome is far from assured, an International Monetary Fund official warned Tuesday. Gita Gopinath, economic counselor and director of the research department at the IMF, an organization representing 190 countries working to foster economic cooperation, said pent-up demand and supply chain bottlenecks caused by the pandemic have led to higher-than-expected inflation readings recently. Those price spikes are primarily due to increases in areas that were hardest hit, like travel and hospitality, and the low levels of inflation that were occurring when many businesses closed for lockdowns, Gopinath wrote in a blog post. While these and other issues, like persistent unemployment and wage pressures, should resolve as life returns to normal, Gopinath warned this scenario is “subject to significant uncertainty given the uncharted nature of this recovery.” Kristalina Georgieva, managing director of the IMF, expressed similar views earlier this month. Wrote Gopinath: “More persistent supply disruptions and sharply rising housing prices are some of the factors that could lead to persistently high inflation. Further, inflation is expected to remain elevated into 2022 in some emerging market and developing economies, related in part to continued food price pressures and currency depreciations.” U.S. consumer prices rose 5.4% in the 12 months to June, the largest 12-month increase since August 2008, and more than the Federal Reserve’s long-term average inflation target of around 2%. The Federal Open Market Committee, led by Fed Chairman Jerome Powell, kicked off its two-day monthly meeting Tuesday. At the end of the meeting on Wednesday, the committee will release a policy statement followed by a press conference, where Powell will likely answer questions about the economy, including inflation, and the expected pace of interest rate increases to slow an overheating economy. Gopinath warned of financial conditions tightening too abruptly if there’s a “sudden reassessment” of monetary policy, especially in the U.S. “A worsening pandemic and tightening financial conditions would inflict a double hit on emerging market and developing economies and severely set back their recoveries,” she wrote. Have a question, comment, or story to share? You can reach Medora at email@example.com Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. IMF. “Drawing Further Apart: Widening Gaps in the Global Recovery.” Bureau of Labor Statistics. "Consumer Price Index Summary."