IMF Warns Cost-of-Living Crises Lift Inflation Expectations, Push 23 Million Into Extreme Poverty

WASHINGTON, October 6, 2026 — Sharp spikes in food and energy prices are likely to become more frequent and will keep inflation expectations elevated for years, the International Monetary Fund said, warning such crises worsen poverty and threaten economic stability. New IMF research covering three decades of government mitigation strategies found poorer households face an inflation gap of 0.8 percentage points above the standard measure, meaning 23 million more people fell below the extreme poverty line from 2021 to 2024 than previously calculated. Five-year-ahead inflation expectations remain above pre-crisis levels even three years after a shock, potentially forcing interest rate increases. The IMF said targeted cash transfers best protect vulnerable households while preserving price signals. Price controls and consumption tax cuts cost governments three to six times more, while producer subsidies cost 22 times as much and can subsidize foreign consumers. The findings appear in Chapter 2 of the forthcoming World Economic Outlook.