IMF Chief: War-Induced Energy Shock Not Over, Central Banks Must Focus on Price Stability

International Monetary Fund (IMF) Managing Director Kristalina Georgieva delivered a speech on Tuesday (25th) at the organization's headquarters in Washington, D.C., warning that while the global economy has demonstrated resilience, it is facing an intense 'tug-of-war.' She highlighted that negative supply shocks from the Iran conflict in the Middle East are now competing with positive demand shocks driven by surging investments in artificial intelligence (AI), creating high uncertainty for the future.

Georgieva noted that despite the closure of the Strait of Hormuz due to the Iran war, the global economy has withstood the energy shock better than expected. This resilience stems from multiple countries tapping into oil and gas reserves, increasing energy supplies from sources outside the Persian Gulf, reducing energy demand, and expanding renewable energy capacity. Brent crude oil prices currently remain in the range of $80 to $90 per barrel. However, she emphasized, 'The energy shock is not over.' A renewed surge in oil prices could exacerbate inflation, forcing central banks to maintain tight monetary policies.

In contrast, the AI investment boom has emerged as a strong pillar of global demand. Countries are expanding data center construction and boosting AI hardware supply, with AI-related spending in regions like the United States strongly supporting corporate profits and consumer activity. Nevertheless, the IMF cautioned about the potential risks the AI boom may pose to financial stability.

With bond yields rising and inflation proving stubborn, Georgieva strongly urged governments not to delay difficult policy decisions. She called for credible, timely plans to bring national debt and deficits back onto a sustainable path. She also emphasized that central banks must remain 'highly focused' on their mandate of price stability and avoid premature monetary easing.

The IMF maintained its global economic growth forecast for 2026 at 3.0% in July but revised upward its inflation projections due to rising food and energy prices.

Looking ahead, Georgieva will attend the Jackson Hole Central Bank Symposium for the first time this week. Markets will closely watch the first major speech by Kevin Warsh, the newly appointed Chair of the U.S. Federal Reserve (Fed), for clues on future interest rate directions.

Georgieva stressed that the current economic recovery is highly unpredictable, stating, 'There is no room for complacency at this moment.' She urged countries to prepare for further uncertainties.