IMF Warns of Upside Inflation Risks, Danger of Too Much Government Spending

The International Monetary Fund (IMF) issued a warning about a jump in upside risks to inflation, driven by elevated service-sector costs and exacerbated by too much government spending and the forces of deglobalization, which could prompt the U.S. central bank to hold interest rates higher for longer and so dim prospects for a soft landing. The warning came in a combination of a blog post penned by Pierre-Olivier Gourinchas, the IMF’s director of research, an overview of the organization’s latest edition of the World Economic Outlook report, and the full report itself. “The good news is that, as headline shocks receded, inflation came down without a recession,” Mr. Gourinchas wrote in the blog post. “The bad news is that energy and food price inflation are now almost back to prepandemic levels in many countries, while overall inflation is not.”...