IMF warns of prolonged rise in inflation expectations — Anadolu Agency
In Turkey, the International Monetary Fund said that cost-of-living crises can raise inflation expectations for years and cause a prolonged loss of purchasing power. As Anadolu Agency reports, expectations remain above pre-crisis levels even after the initial surge in food and energy prices, which may make it more difficult for central banks to contain inflation.
Prices of essential goods rise faster
The findings are based on an analytical chapter of the October 2026 edition of the IMF's World Economic Outlook report, the full version of which the fund is due to publish on October 13.
During such crises, prices for essential goods rise faster than prices for other goods and wages. This makes it harder for households to cut spending on necessities. The relative cost of essential goods usually continues to increase for more than a year after the crisis begins and remains high thereafter. Real wages, meanwhile, fall and do not return to previous levels for a long time.
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IMF recommends targeted support
Lower-income households suffer the most from rising prices, as food and energy account for a larger share of their spending. According to data covering 76 countries over three decades, governments often used large-scale price-containment measures, especially in emerging market economies and low-income countries.
The IMF considers temporary targeted cash payments to be the most effective way to protect the population while preserving budget resources. According to the fund's estimate, consumer subsidies require three to six times more funding than targeted transfers for the same level of protection, while producer subsidies require 14 to 22 times more. During Europe's energy crisis in 2022–2023, less than 20 cents of every euro spent to contain energy prices reached the poorest fifth of households.
The fund also noted that broad subsidies weaken incentives to save resources and may raise global prices if many countries introduce them simultaneously. The IMF believes that broader support should be reserved for exceptional circumstances, when there is fiscal space and a clearly defined duration for it.
