IMF warns cost-of-living crises worsen inflation and poverty

Chiara Maggi: Chiara Maggi is an IMF economist who co-led the research on cost-of-living crises published as Chapter 2 of the forthcoming World Economic Outlook. She highlighted that such crises undermine price stability, lower living standards, and exacerbate inequality, based on examination of three decades of government mitigation strategies. Shantayanan Devarajan: Shantayanan Devarajan is a Georgetown University professor and former World Bank economist who participated in a discussion on the IMF findings. He noted that developing countries face compounded pressures from higher oil prices, debt levels, borrowing costs, and weather patterns amid already low growth rates. International Monetary Fund: The International Monetary Fund is a global organization focused on promoting economic stability, monetary cooperation, and sustainable growth among its member countries through policy advice and research. In this news, it released analysis showing how cost-of-living crises from food and energy price spikes drive persistent inflation expectations, increase poverty, and heighten inequality risks worldwide. • Necessities continued becoming relatively more expensive for over a year after typical cost-of-living crises began. • Inflation expectations remained above pre-crisis levels even three years after onset, potentially complicating monetary-policy efforts. • Lower-income households were hit hardest because food and energy consume a larger share of their budgets. • Household-specific inflation measures indicate poverty impacts were larger than headline consumer-price indexes suggested. • The IMF’s analysis supports targeted cash assistance over broad subsidies as a more effective way to protect vulnerable households.