IMF Forecasts, FOMC Protocols and Pandemic

8 Apr 2021

This week the IMF revised its own 2021 forecasts for the growth rates of the world economy and individual countries. The IMF expects the global economy to grow by 6% in 2021, compared to its January forecast of 5.5%. For advanced economies, growth will be 5.1%, while the US growth is expected to be 6.4%. Emerging market and developing economies are growing by 6.7% for 2021, with India's growth expected to increase by 12.5%.

The basic motivation for revising the forecast is the latest round of the US fiscal stimulus, multiplied by the rollout of the vaccination campaign around the world.

In general, such optimism by the IMF seems somewhat premature not in relation to the USA, but to other countries and India in particular. The fact is that a new wave of the pandemic is covering the world more and more. And India appears to be the hardest hit in this regard, with 115K new cases per day.

Although it is not joyful for other countries, as well. Argentina has the highest number of daily coronavirus cases since the start of the pandemic. Bangladesh is seeing a new high in daily COVID-19 infections and deaths. Brazil has the deadliest day of the pandemic. And this list, unfortunately, can be continued for a very long time. The economic consequences of this news are obvious, since there is no need to go deep, we went through all this a year ago. So the optimism of the IMF against this background looks a little strange.

The main event of yesterday can formally be considered the Fed's FOMC meeting protocol publication. And the point is not even that something revolutionary was expected, but that the role of the Fed in the modern financial world is very great, and the stakes are higher than ever. The Fed noted the progress in the economy, but continued to insist on current monetary policy, as significant progress in the recovery is likely to take "some time." The futures market now expects interest rates to rise in 2022 from 2024 a year earlier amid rising inflation.