Economy
Trump takes most aggressive move to roll back US climate regulations
The Trump administration unveiled its most far-reaching move yet to roll back U.S. climate policy on Thursday, declaring it would rescind the scientific determination that greenhouse gases pose a threat to public health, a finding that underpinned federal climate rules, and eliminate national emissions standards for vehicles and engines.
The moves come after a year of implementing a string of regulatory cuts and other actions intended to unfetter fossil fuel development and stymie the rollout of clean energy.
“Under the process just completed by the EPA, we are officially terminating the so-called endangerment finding, a disastrous Obama-era policy that severely damaged the American auto industry and drove up prices for American consumers,” Trump said, saying it was the biggest deregulatory action in U.S. history.
Trump announced the repeal beside Environmental Protection Agency Administrator Lee Zeldin and White House Budget director Russ Vought, who has long sought to revoke the finding and was a key architect of conservative policy blueprint Project 2025.
Trump has said he believes climate change is a “con job,” and has withdrawn the United States from the Paris Agreement, leaving the world’s largest historic contributor to global warming out of international efforts to combat it in addition to killing Biden-era tax credits aimed at accelerating deployment of electric cars and renewable energy.
Former President Barack Obama blasted the move, saying without the endangerment finding, “we’ll be less safe, less healthy and less able to fight climate change – all so the fossil fuel industry can make even more money.”
Former President Barack Obama blasted the move, warned that Trump’s decision would leave Americans “less safe, less healthy.”
“Without it, we’ll be less safe, less healthy and less able to fight climate change – all so the fossil fuel industry can make even more money,” the 44th president wrote on social media platform X.
‘Holy grail’
Zeldin said the Trump administration took on the most consequential climate policy of the last 15 years, something that the agency avoided during his first term amid industry concern about legal and regulatory uncertainty.
“Referred to by some as the holy grail of federal regulatory overreach, the 2009 Obama EPA endangerment finding is now eliminated,” he said.
The endangerment finding was first adopted by the United States in 2009, and led the EPA to take action under the Clean Air Act of 1963 to curb emissions of carbon dioxide, methane, and four other heat-trapping air pollutants from vehicles, power plants and other industries.
It came about after the Supreme Court ruled in 2007 in the Massachusetts vs. EPA case that the agency has authority to regulate carbon dioxide and other greenhouse gas emissions under the Clean Air Act.
Its repeal would remove the regulatory requirements to measure, report, certify, and comply with federal greenhouse gas emission standards for cars, but may not initially apply to stationary sources such as power plants.
The transportation and power sectors are each responsible for around a quarter of U.S. greenhouse gas output, according to EPA figures.
The EPA said the repeal and end of vehicle emission standards will save U.S. taxpayers $1.3 trillion, while the prior administration said the rules would have net benefits to consumers through lower fuel costs and other savings.
The Alliance for Automotive Innovation, representing major automakers, did not endorse the action but said “automotive emissions regulations finalized in the previous administration are extremely challenging for automakers to achieve given the current marketplace demand for EVs.”
The Environmental Defense Fund said that the repeal will end up costing Americans more, despite EPA’s statement that climate regulations have driven up costs for consumers.
“Administrator Lee Zeldin has directed EPA to stop protecting the American people from the pollution that’s causing worse storms, floods, and skyrocketing insurance costs,” said EDF President Fred Krupp. “This action will only lead to more of this pollution, and that will lead to higher costs and real harms for American families.”
Under former President Joe Biden, the EPA aimed to cut passenger vehicle fleetwide tailpipe emissions by nearly 50% by 2032 compared with 2027 projected levels and forecast between 35% and 56% of new vehicles sold between 2030 and 2032 would need to be electric.
The agency then estimated that the rules would result in net benefits of $99 billion annually through 2055, including $46 billion in reduced fuel costs, and $16 billion in reduced maintenance and repair costs for drivers.
Consumers were expected to save an average of $6,000 over the lifetime of new vehicles from reduced fuel and maintenance costs.
The coal industry celebrated the announcement on Thursday saying it would help stave off retirements of aging coal-fired power plants.
“Utilities have announced plans to retire more than 55,000 megawatts of coal-fired generation over the next five years. Reversing these retirement decisions could help offset the need to build new, more expensive electricity sources and prevent the loss of reliability attributes, such as fuel security, that the coal fleet provides,” said America’s Power President and CEO Michelle Bloodworth.
Uncertainty unbound
While many industry groups back the repeal of stringent vehicle emission standards, others have been reluctant to show public support for rescinding the endangerment finding because of the legal and regulatory uncertainty it could unleash.
Legal experts said the policy reversal could, for example, lead to a surge in lawsuits known as “public nuisance” actions, a pathway that had been blocked following a 2011 Supreme Court ruling that GHG regulation should be left in the hands of the Environmental Protection Agency instead of the courts.
“This may be another classic case where overreach by the Trump administration comes back to bite it,” said Robert Percival, a University of Maryland environmental law professor.
Environmental groups have slammed the proposed repeal as a danger to the climate. Future U.S. administrations seeking to regulate greenhouse gas emissions likely would need to reinstate the endangerment finding, a task that could be politically and legally complex.
But environmental groups are confident that the courts will continue their track record of backing the EPA’s authority to use the Clean Air Act to regulate greenhouse gases.
Several environmental groups, including the Natural Resources Defense Council and Earthjustice, have said they will challenge the reversal in court, setting off what could be a years-long legal battle up to the Supreme Court.
“There’ll be a lawsuit brought almost immediately, and we’ll see in them in court. And we will win,” said David Doniger, senior attorney at the NRDC.
At the training center of Indian startup Pronto, women sharpen their cleaning and kitchen skills while also learning how to send out an SOS if they ever feel unsafe while working in clients’ houses. They’re preparing to join India’s latest trend – providing household help for just $1 per hour.
Indu Jaiswar, 35, hopes doing household chores in her first job can help fund her son’s dream of becoming a doctor. “This is what we’ve been doing in our own homes for years. Might as well get paid for it,” said the mother of two.
In a country with an entrenched culture of outsourcing household work, Indian startups Pronto and Snabbit, and listed rival Urban Company are training thousands of domestic helpers.
Urban Company estimates India’s rapidly growing cleaning services market is worth an estimated $9 billion and spread across 53 million households.
Like Uber drivers, the helpers receive bookings on their apps, directing them to apartments in assigned neighborhoods within minutes, and press a countdown timer in their apps before starting work. The potential annual earnings from working eight hours a day can be as high as $5,000 – a figure that far surpasses India’s per capita income of around $3,000.
The companies are betting big, burning millions of dollars to lure busy professionals in cities like New Delhi and Mumbai with under-99-rupee ($1) offerings that have no global parallel. Similar services can cost around $30 an hour in the United States, and around $7 in China.
However, the craze among consumers and workers is tempered by concerns about women’s safety in a country with high rates of sexual harassment. Unlike e-commerce couriers who spend just brief moments at doorsteps, housekeepers may spend hours inside private homes, exposing them to greater risks.
Soumya Chauhan, a principal at Dutch e-commerce investor Prosus, which has a stake in Urban Company, said she views worker safety as the fundamental operational challenge to solve.
“The platforms that successfully crack the safety protocols will earn the deepest consumer loyalty and the most sustainable market returns,” she said.
Safety risks
Cognisant of the challenges for a business that mainly employs women, Snabbit and Pronto said they have an in-app SOS button that alerts area supervisors in case of distress, while Pronto also offers self-defense training.
“In the offline world, the rate of abuse for a lot of these domestic workers is super high,” said Pronto’s 23-year-old CEO Anjali Sardana, adding that her company is trying to comfort its workers by assuring legal and medical support when needed.
Urban Company, which also offers services like plumbing, declined to comment for this story. It has previously said it offers a women-only safety helpline and an SOS app feature.
Shabnam Hashmi, a women’s rights activist, said the companies run extensive background checks on workers before onboarding them, but should also check customer credentials. Currently, users can simply log in to apps to book home help.
“How is it ever possible for these jobs to be safe for women – even with an SOS button? Unless they carry cameras, which is of course impossible, there is no way to know what happens behind that door,” she said.
Pronto worker Jaiswar has found her own workaround: she always calls a customer before visiting a home and goes “only if there’s a woman present.”
Rapid expansion
The companies, meanwhile, are getting record orders.
Urban Company recorded its highest daily home services bookings of 50,000 in February. Snabbit’s have grown to 35,000 orders a day.
Bain Capital-backed Pronto logged a record 22,000 daily bookings in March, up from 2,500 daily orders in October, and raised $25 million in new funding.
Pronto CEO Sardana said she started the business last year after spotting an opportunity to serve three sides: strong demand from customers for reliable maids, workers’ need for more stable and safer jobs, and a gap in the market for a scalable service.
“It’s possible to build a win-win-win business,” she told Reuters.
Fuelling the trend is also India’s lack of a do-it-yourself culture, and Indians’ love for getting things done cheaply.
In Bengaluru, 30-year-old Dhruv, who uses only a first name, said he spent 100 rupees ($1) per hour for Urban Company’s service to help unpack his utensils and hang curtains after moving house.
That helped him “save quite a bit of time and effort,” but the price does matter: “I wouldn’t pay 400 or 500 rupees for it.”
Snabbit founder Aayush Agarwal said his service was becoming popular among young couples and singles who want to schedule housekeepers and not hire monthly domestic helpers who are infamous for skipping work.
Pronto is offering some visits for 25 rupees in Facebook ads with taglines like “Maid on Leave? Don’t grieve,” while an Urban Company three-visit pack costs 66 rupees an hour.
Snabbit ads said a customer booked a helper “just to peel 20 potatoes,” while another had lined up a worker to “separate LEGO blocks by color.”
The cash burn
Like many startups in their growth phase, the companies are paying their workers out-of-pocket to make the jobs attractive, but also doling out hefty discounts to reel in customers.
In October to December, Urban Company disclosures show it received 1.61 million home-help orders, each incurring a loss of 381 rupees ($4). The company says its “discounts are moderating,” but its order values need to almost double to break even.
“Over a period of time, it is safe to say that it will become an earn-as-you-go model,” said Rahul Taneja, partner at Lightspeed, which has backed Snabbit.
At the Pronto center, where workers get a uniform and are trained to wear polished shoes, posters revealed potential payouts: home helpers can earn $1.60 per hour for 12 hours of work daily in a month, 48% more than what a new customer pays.
At more than $500 a month, that’s a big allure for Nisha Chandaliya, 22, who needs to support her ailing mother and has quit a call-center job that stretched long hours and paid only $180 a month.
“It’s exhausting to clean six to seven homes, but I need the stability. I can’t afford to go back,” she said.
The European Union reached a preliminary deal on Monday to nearly halve imports of steel and impose tariffs of 50% on excess shipments to protect the bloc’s steel industry from overproduction elsewhere.
EU steel producers are operating at only 65% capacity due to rising imports and 50% tariffs imposed by U.S. President Donald Trump. The new measures are designed to push capacity utilization up to 80%.
Representatives for the European Parliament and the Council, the body representing EU governments, agreed late on Monday to limit tariff-free imports to 18.3 million metric tons per year, a 47% cut compared to 2024, with a doubling of the out-of-quota duties.
Last year, the main sources of steel imports into the EU were Türkiye, South Korea, Indonesia, China, India, Ukraine, and Taiwan.
EU steel is currently protected by safeguards, put in place during Trump’s first term, with import quotas and 25% tariffs above those limits. However, under World Trade Organization (WTO) rules, they must expire after eight years – on June 30.
The European Commission, which proposed new measures in October, said the EU steel sector has lost some 100,000 jobs since 2008 and output would decline even further without extended restrictions.
The new measures will take more into account where imported steel was originally melted and poured to avoid circumvention and be regularly reviewed to ensure they are effective.
The parties also committed to phase-out imports of steel from Russia swiftly, possibly by September 2028. Some 3.7 million tons of steel slabs came from Russia to the EU last year.
The parliament and Council will need to vote on Monday’s agreement for the measures to enter force.
International real estate investors are seeking alternative routes for “risk diversification” and to “create a Plan B” in the wake of the conflict between the U.S.-Israel and Iran, with Türkiye standing out among these options, according to a report on Tuesday.
It has now been around one-and-a-half months since the conflict erupted, turning into a regional tension following U.S. and Israeli attacks on Iran and Tehran’s retaliations.
Dubai – ranking high among the locations where Turkish citizens purchase the most property – continues to be negatively affected by the Middle East crisis. Accordingly, the spread of attacks between the U.S., Israel and Iran to other regional countries has led to a drop in property sales in Dubai, which had become a focal point for international investors.
According to the digital platform DXB Interact, which provides data on the real estate market in Dubai, property sales dropped from 17,027 units (between Feb. 2 and March 1) to 11,828 in the four weeks after the conflict began (March 2-29). Thus, the initial decline in sales of 25% rose to 30.5% over the course of a month.
The transaction volume also dropped by 36% in one month, falling from $16.53 billion to $10.58 billion, according to the report by Anadolu Agency (AA), citing platform data.
Moreover, industry representatives suggest that international real estate investors are seeking alternative routes for “risk diversification” and “Plan B” because of the war.
Decline in prices
International real estate expert and CEO of Level Immigration and Properties, Haitham Ahmet Alamarioğlu, said they expect the decline in property sales in Dubai to continue in the short and medium term. He stated that without a permanent cease-fire, international investors would remain in a wait-and-see position.
“Without a permanent cease-fire, trust will not return, and transaction volumes will not recover without trust,” Alamarioğlu said.
“In such scenarios, having a Plan B shifts from precaution to necessity. Historically, it has taken at least 12-18 months for geo-politically triggered corrections in Dubai to reverse. This time, it might take even longer,” he added.
Additionally, Alamarioğlu stated that early data indicate a 4%-5% drop in prices, adding, however, that the main pressure “hasn’t been fully felt yet.”
“When transaction volumes fall, prices react with a delay. Sellers first resist lowering prices, the market freezes, then the correction comes. A more pronounced correction in the next quarter is highly likely.”
3 main alternative routes
Still, Alamarioğlu remarked that Dubai’s story isn’t over, but argued that its “safe haven” narrative took a significant hit.
“Dubai partially lost its appeal. There’s no sudden exodus, but a gradual rebalancing. Investors are now asking, ‘If I need to exit this market tomorrow, what’s my Plan B if I can’t quickly sell my property and my capital gets stuck here for my family?'”
He went on to say that Türkiye, Greece and Panama are standing out as three alternative destinations for international property investors.
He noted a significant increase in demand from Iranian and Gulf-based buyers in Türkiye, which he tied to its “citizenship by investment” program.
“This is driven by visa-free entry, cultural proximity, and it being one of the rare accessible ways to obtain full citizenship through property acquisition,” he noted.
He also mentioned the Golden Visa program in Greece, as well as the “qualified investor program” in Panama, which grants permanent residence in 30 days.
Özden Çimen, international real estate expert and CEO of Parcel Estates, also stated that recent developments in the Middle East have put investors in a “wait-and-see” mode, and there hasn’t been panic selling yet.
Çimen said that Dubai’s zero income tax, high rental yields, secure regulatory environment, and high liquidity still attract investor interest. She also mentioned the recent rise in the Dubai Financial Market Real Estate Index, which tracks real estate company shares, after the cease-fire talks.
Çimen conveyed that Dubai hasn’t lost its allure, but suggested that international investors are diversifying geographically.
“Recently, investors have been considering locations like London, Lisbon, Istanbul, Miami and Barcelona as additional portfolio destinations. We can view this as a risk diversification strategy.”
Disinflation in Türkiye continues across all subgroups, albeit at varying speeds, the central bank’s chief said on Monday, according to the text of a presentation made in New York.
Annual inflation declined to 30.9% in March despite the pricing pressures from the fallout of the Iran war. Central Bank of the Republic of Türkiye (CBRT) Governor Fatih Karahan said underlying trend of inflation also eased last month.
In the presentation to investors in the U.S., Karahan said the disinflation process was supported by a reduced rigidity in rent and education prices, an effect he said was expected to continue throughout the year.
The U.S.-Israeli war on Iran has damaged Gulf energy production, stranded tanker traffic in the key Strait of Hormuz and boosted oil prices in the world’s worst energy shock.
That came as a major test for countries that import most of their energy needs, including Türkiye.
Turkish authorities have taken steps to cushion the fallout of the war on domestic markets. Officials said they were prepared for more steps if the two-week cease-fire, announced last week, does not hold.
The CBRT has already halted its easing cycle at 37%, lifted its overnight rate by about 300 basis points to near 40% and announced steps to support liquidity in the domestic markets.
Bankers on Monday estimated that the central bank bought $13 billion in foreign exchange last week in a reversal since the Iran war began, and total reserves rose by some $9 billion to $171 billion.
Net reserves are estimated to have increased by $10 billion last week to $55 billion, bankers said, citing calculations based on data.
Karahan said declining gold prices have contributed to easing household demand for foreign currency, while international reserves are currently stronger compared to previous periods of capital outflows.
Meanwhile, Turkish authorities last month reintroduced a system that adjusts the special consumption tax (ÖTV) on fuel products and prevents higher oil prices from being fully passed through to consumers.
Karahan said the mechanism, called the “sliding-scale” system, has helped limit inflationary pressures.
The presentation also showed that the governor said demand indicators pointed to a slowdown in Türkiye’s economic activity.
Capacity utilization remains weak, he said, and demand-side indicators suggest moderating growth. Survey-based data also confirm the slowdown, while credit growth decelerated in the first quarter.
On external balances, Karahan stated that the current account deficit, shaped largely by energy imports and tourism revenues, remains below historical averages.
Official data on Monday showed Türkiye’s current account balance registered a deficit of $7.5 billion in February, in line with market expectations.
The figure lifted the January-February deficit to $14.54 billion.
Investors are buoyed by a political change in Hungary and are banking on a positive new chapter for the Central European nation as incoming Prime Minister Peter Magyar insists there is no time to waste following his resounding defeat of Viktor Orban – provided he can stick to his plans.
Magyar’s landslide win gives his center-right Tisza party the chance to change the judicial, electoral, public tendering and media control laws that were at the heart of Orban’s fractious relationship with Brussels and led to around 18 billion euros ($21.2 billion) of EU funding being withheld.
During a marathon post-victory press conference, Magyar, who wants to use the money to boost the economy, pledged to carry out sweeping reforms, join the European Public Prosecutor’s Office, set a two-term limit for prime ministers and unblock a 90 billion euro EU loan for Ukraine.
For economists, the implications are obvious – the unfreezing of EU funds alone, which amount to some 8% of Hungary’s annual gross domestic product (GDP) – could add 1-1.5 percentage points to its growth, Morgan Stanley estimates.
For international investors, who can pick and choose where they put their money, that and the broader change in mood music would be a significant lift.
“It’s a new chapter for Hungary, and it’s a great opportunity,” PGIM’s head of emerging market macro research, Magdalena Polan, said about the change of government.
“To move the economy will not take much because sentiment and rule of law are such an important part of the economic set of factors that impact growth.”
Analysts at JPMorgan expect a reset in relations with the EU to take place almost immediately and say early commitments to reform are likely to be enough to start unlocking the frozen EU money.
EU Commission President Ursula von der Leyen hailed Magyar’s win as “a victory for fundamental freedoms,” comparing the ousting of nationalist Orban to Hungary’s 1956 anti-Soviet uprising and its 1989 break with communism.
Although the mid-year deadline for Budapest to absorb the EU’s post-COVID Recovery and Resilience Facility (RRF) funds looks too tight on the face of it, JPMorgan also believes the “extraordinary circumstances will call for exceptional flexibility” from the EU.
Skeletons in the coffers
The election result sent Hungary’s forint surging to its best level against the euro in four years, while 10-year Hungarian government borrowing costs fell by half a percentage point to their lowest since 2024, and the stock market gained almost 5%.
Once the initial excitement settles, though, investors will want to see what Tisza says about state finances after they have had a proper look at the books.
Hungary currently has one of the EU’s largest budget deficits at over 5% of GDP. Its debt-to-GDP ratio is above 70% and rising, and credit rating agency S&P Global has the country just one downgrade away from “junk” status.
Magyar has said he hopes stronger growth and an improvement in sentiment that lowers the government’s borrowing costs further will help the situation. He also vowed to stamp out corruption, end “prestige” investment projects and halt overpriced public procurement.
“I’m sure they will find some skeletons,” Aberdeen EM debt portfolio manager Viktor Szabo said, referring to Tisza’s audit of the finances, although he also expects S&P to stabilize Hungary’s credit rating given the likely unfreezing of EU funds.
The other key to-dos on the new government’s list will be a credible medium-term budget plan, Szabo said. One needs to be presented to the European Commission by October, but an outline of the plan and some ad-hoc measures might be required well before then.
New beginnings, old realities
Euro adoption is also on the agenda, even if still years away.
It was a key pledge of Magyar’s election campaign, and Tisza’s supermajority should allow it to push through all the required constitutional changes.
Still, Deutsche Bank analysts say the country’s “fiscal and debt dynamics remain incompatible with Maastricht criteria at the moment,” given a eurozone entry requirement to have a sub 3% of GDP budget deficit and a debt-to-GDP level of 60% or lower, or at least reducing towards it.
Hungary’s 3% (+/-1pps) inflation target also needs to be brought in line with the “close-but-below” 2% preferred level of the European Central Bank (ECB), they said.
PGIM’s Polan also sees some broader economic and political realities remaining in place.
A sudden disbursal of EU funding before reforms are cemented could leave Brussels open to legal challenges from other potentially unhappy member countries.
Hungarian companies, meanwhile, are running into a labor shortage made worse by an aging population, language barriers and their approach to immigration. Living standard improvements haven’t kept up with some of its neighbors either, and ending reliance on Russian gas looks even harder for now, given the Middle East conflict.
Nevertheless, the departure of Orban means much is about to change, and most likely for the better for many investors.
“We are in a completely new situation here,” Polan said.
The International Monetary Fund (IMF) slashed its 2026 global growth projection Tuesday, as expected, warning that the world economy could be “thrown off course” by war in the Middle East, which hit commodity markets and sparked higher prices.
The global economy is set to grow by 3.1% this year, said the International Monetary Fund in its World Economic Outlook report, released during its spring meetings in Washington.
This is down from a 3.3% forecast in January before hostilities erupted as U.S.-Israeli strikes against Iran started on Feb. 28, prompting Tehran’s retaliation and sparking a broader conflict in the region.
“We were planning to upgrade growth for 2026 to 3.4%” if not for the war, IMF chief economist Pierre-Olivier Gourinchas told Agence France-Presse (AFP).
Prices of oil, gas and fertilizers have surged due to the conflict, as Iran virtually blocked traffic through the Strait of Hormuz, a key waterway for shipments. U.S. President Donald Trump has also ordered a naval blockade around Iran’s ports.
Higher inflation
The fund expects higher inflation this year at 4.4%, 0.6 percentage points above its January forecast.
After this, the “disinflation path” of the past few years should reassert itself, Gourinchas said.
But these projections assume a relatively short-lived conflict with temporary energy market disruptions.
“We have to be very concerned about the potential for this to become a major energy crisis,” he warned.
In more adverse scenarios where energy prices remain steep for the year, global growth could slow to 2.5% or even to around 2.0%.
“Since 1980, it’s basically been four times when growth has been at two percent or below,” said Gourinchas.
These included periods such as the 2008 global financial crisis and the COVID-19 pandemic.
“This latest shock comes less than a year since the shift in U.S. trade policies, and the transition to a new international trade system is still ongoing,” the IMF said.
A year ago, Trump unleashed sweeping tariffs on U.S. trading partners, rocking financial markets and snarling supply chains.
A swath of these tariffs has been struck down by the Supreme Court, but uncertainty lingers as Trump moves to reimpose duties via other means.
Uneven impact
Although overall revisions to global growth and inflation appear modest, the IMF cautioned that the war has taken a bigger toll on the Middle East and “vulnerable economies” elsewhere.
“The impact on emerging market and developing economies would be almost twice that on advanced economies,” the fund said.
Higher energy and fertilizer costs could bring steeper food costs, mainly hitting low-income energy importers, Gourinchas said.
Growth projections this year for the Middle East and central Asia were cut by around half to 1.9%.
Saudi Arabia, the Middle East’s biggest economy, is set to see 3.1% growth this year, down 1.4 percentage points from January’s expectation.
Among the world’s two biggest economies, U.S. growth is still set to accelerate to 2.3% this year, although the pace of growth was revised slightly lower.
“The U.S. at the margin is benefiting from higher energy prices,” Gourinchas said. But gasoline prices have also jumped for consumers.
China’s growth is anticipated to cool to 4.4%, a touch below the January forecast, too.
The IMF flagged an underlying “unevenness” in both economies.
Domestic activity lags behind exports in China, while a strong showing in the United States has been accompanied by low employment growth.
Euro area growth was revised 0.2 percentage points down to 1.1% for 2026.
U.K. growth saw a bigger downshift by 0.5 percentage points, to 0.8% this year.
While the IMF does not expect inflation expectations to go off-track, there is concern that they may not be as well-anchored as before.
Past inflation episodes remain fresh in the public’s minds, and firms might act to restore margins more quickly than before.
“If that happens, then you can get much more persistent inflation going on, that would be reflected in higher inflation expectations,” Gourinchas said.
If so, central banks might need to step in and raise interest rates to cool the economy, despite the ongoing negative supply shock.
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