IMF Spokesperson Kozack Says Disinflation Has Paused and Advises Central Banks to Focus on Price Stability

International Monetary Fund (IMF) Spokesperson Julie Kozack stated that the disinflation process that started after the cost of living crisis in 2022 has paused somewhat and advised central banks to "continue to focus on price stability targets."

Kozack made evaluations about the developments in the global economy at the press conference he held.

Stating that the global economy remained resilient despite the 6-month war in the Middle East, Kozack stated that the economy survived the shocks, especially the energy shock, better than feared.

Kozack stated that the world economy continues to remain on the 3 percent growth path and that uncertainty continues to remain high.

Stating that the global economy is being pulled in opposite directions by an energy-based supply shock and an artificial intelligence-led demand shock, Kozack said, "These two forces are dragging the global economy in different directions. However, there are significant differences in how these dynamics affect economies one by one. For this reason, we evaluate that the risks to the economic outlook continue to remain high." he said.

Kozack emphasized that the energy shock is not over yet and noted that oil and natural gas prices continue to remain high.

"We predict that public debt will increase further globally"

Pointing out that the pressures on public debt are increasing, Kozack stated that the ratio of global public debt to Gross Domestic Product (GDP) has reached almost 100 percent. Kozack stated that this is the highest level seen since the Second World War and that they predict that public debt will increase further on a global scale.

IMF Spokesperson Kozack said, "I can say that the disinflation process that started after the cost of living crisis in 2022 has paused somewhat." he said.

Reminding that they revised the 2026 global inflation forecast to 4.7 percent in the World Economic Outlook report update in July, Kozack explained that inflation expectations have increased for this year, but remain anchored in the long term.

"The rise in bond interest rates in developed countries affects all countries."

Pointing out that the 10-year treasury bond interest rates of key developed economies such as the USA, France and Japan are at the highest levels seen in a long time, Kozack said, "When the benchmark borrowing costs in developed economies rise, this has an impact on almost all countries. Although many developing economies have taken serious steps to strengthen their policy frameworks and transition to independent central banking in recent years and have managed to narrow their risk premiums, these premiums are now added to the higher benchmark interest rates." he said. Therefore, Kozack stated that the increase in benchmark interest rates offset the decline in risk premiums and noted that these difficulties require policy makers to be both agile and reliable.

Kozack said, "On the inflation side, our advice to central banks is to continue focusing on price stability targets. We continue to encourage financial authorities to prepare medium-term, credible fiscal consolidation plans." made his assessment.

Pointing out the importance for financial authorities of having a clear plan and strategy on how to reduce budget deficits and debt, Kozack said that they also gave advice to members to revive growth.

"Artificial intelligence will have a positive impact on growth in the short term"

Referring to the secondary sanctions within the scope of the "Economic Exclusion Operation" carried out by the USA against Iran, Kozack said, "We are monitoring the issue meticulously, and we will include this issue more comprehensively in both our World Economic Outlook report and our Middle East regional assessments." he said.

Regarding the effects of artificial intelligence on growth, Kozack stated that it will contribute to growth with a positive demand shock in the short term. Kozack said, "What we will focus on in the medium term, on the artificial intelligence side, is whether it will lead to increased productivity and ultimately a permanent growth momentum. The medium-term effects of artificial intelligence on growth, labor market and employment continue to be on our research agenda." he said.

On the question regarding China-US trade relations, Kozack said:

"We highly welcome and attach great importance to the leaders of the world's two largest economies coming together, establishing dialogue and negotiating ways to resolve tensions or disputes between them. The fact that the US and China are in contact and looking for ways to overcome tensions is a positive development for both the US and China, and therefore for the entire global economy."