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IMF: strong dollar threatens global inflation


July, 17 2024
watermark Economic news

The International Monetary Fund (IMF) has expressed serious concerns about the impact of a strong US dollar on the global economy. In its latest report, the IMF warns that high interest rates in the United States, which continue to rise, may lead to further strengthening of the dollar and, as a result, to an increase in inflation worldwide. 


According to the IMF, if the US does not cut rates, the dollar will continue to strengthen, forcing central banks of other countries to raise their interest rates to stop capital outflows. This, in turn, may lead to an even greater increase in inflation. 


The US dollar plays a dominant role in world trade — a significant part of goods are sold in this currency. This is one of the factors supporting the demand for the dollar and its status as the world's main reserve currency. 


In addition, the IMF notes that the European Central Bank (ECB) will be limited in its ability to cut rates if the United States does not take similar actions.  


The euro may be at risk of depreciation if inflationary pressures and a decline in consumer activity return. Such a scenario could lead to stagflation, a complex combination of slowing economic growth and high inflation.


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