Published by Global Banking & Finance Review®
Posted on April 14, 2026
3 min readLast updated: April 14, 2026
Add as preferred source on GoogleIMF Chief Economist Pierre‑Olivier Gourinchas warns that if the Middle East conflict drags on, much tougher monetary tightening may be required—causing more economic pain than post‑pandemic—amid slowing global growth and volatile oil prices.
By David Lawder
WASHINGTON, April 14 (Reuters) - Central banks may need to inflict much more economic pain to control inflation fueled by a long Middle East war than they did to control the spike in prices after the pandemic, the International Monetary Fund's chief economist said.
When Russia's invasion of Ukraine in 2022 drove oil prices above $100 a barrel, an already overheated post-COVID economy meant small increases in interest rates went a long way to cool demand, IMF Chief Economist Pierre-Olivier Gourinchas said in an interview on Tuesday.
But with much more slack in today's economy, including a weaker labor market and ample supplies of most goods and services, much stronger monetary tightening may be needed, particularly if inflation expectations become unanchored, Gourinchas said.
"Stepping on the brakes will be painful" in such an environment, Gourinchas said as IMF and World Bank spring meetings got under way in Washington.
"You may have to inflict a lot more pain to get the same disinflation result."
However, it's far from clear how hard central banks may need to push back against the effects of rising prices for oil, gas and other commodities considering the uncertainty over how the conflict will develop.
The IMF on Tuesday cut its 2026 global growth outlook to 3.1%, down 0.2 percentage points from January, based on the assumption the war will be short-lived and oil will average $82 per barrel this year.
In the institution's "adverse scenario" of a longer conflict and oil prices averaging $100, growth slows to 2.5%.
Its "severe scenario" envisions an extended conflict, with oil prices averaging $110 in 2026 and $125 in 2027. Growth drops to 2.0% this year, which the IMF sees as the brink of a global recession.
The main concern in such an environment is that inflation expectations could become unanchored, Gourinchas said, adding that 2022's inflation shock had made people hypersensitive to prices.
Companies would raise prices more readily, and workers would be quicker to seek higher pay, he said.
"Once we get into that world, people are going to look at this and say, inflation is here and it's here to stay."
(Reporting by David Lawder; Editing by Kevin Buckland)
A prolonged conflict could lead to higher oil prices and persistent inflation, requiring stronger central bank measures to control inflation.
Today's economy has more slack, a weaker labor market, and ample supply, making it harder for moderate rate hikes to control inflation.
The IMF projects global growth could slow to 2.5% in an adverse scenario and 2.0% in a severe scenario, nearing recession.
If inflation expectations become unanchored, companies may raise prices and workers demand higher pay, making inflation harder to control.
The IMF's scenarios range from oil averaging $82 per barrel if the conflict is short, to $125 per barrel if the war is extended.
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