Policy moves on the energy shock

The International Monetary Fund and World Bank said they will mobilise an additional $150 billion for emerging economies as governments scramble to contain a new energy-price shock. (worldbank.org) The pledge came out of the spring meetings in Washington after the two institutions set up, on April 1, a joint coordination group with the International Energy Agency to respond to the economic fallout from the war in the Middle East. (worldbank.org) The U.S. moved in parallel on oil supply. Treasury Secretary Scott Bessent said Washington extended a sanctions waiver for Russian oil purchases after requests from more than 10 vulnerable countries, and the renewed license runs through May 16 for cargoes loaded by April 17. (apnews.com) That waiver leaves Russian barrels in the market while fighting and shipping disruption around the Middle East have pushed energy back to the center of economic policy. The IMF said its reference forecast assumes a 19% rise in energy commodity prices in 2026. (imf.org) The growth hit is already showing up in official forecasts. The IMF’s April 2026 World Economic Outlook put global growth at 3.1% this year, down 0.2 percentage point from its January update, while warning that renewed inflation pressure has returned. (imf.org) For emerging markets, the problem is basic arithmetic: imported fuel raises inflation, widens trade deficits and drains foreign-exchange reserves at the same time. The IMF said Asia’s oil-importing economies face weaker external balances and less room for policy support as fuel costs rise. (imf.org) Central banks are adjusting more cautiously than they were a month ago. European Central Bank President Christine Lagarde said on March 19 that the bank would stay data-dependent and judge rates meeting by meeting as incoming figures show how much of the shock feeds into broader inflation. (ecb.europa.eu) That shift has moved market and economist attention to June rather than April 30. In a Reuters poll published April 23, 44 of 85 economists expected the European Central Bank to raise its deposit rate to 2.25% in June, while 40 expected no change. (usnews.com) The European Central Bank’s own March projections sketched the trade-off. Staff raised the 2026 euro-area inflation forecast to 2.6%, cut growth to 0.9%, and said the revision was driven mainly by higher energy prices linked to the war. (ecb.europa.eu) The institutions are also drawing a line under broad fuel subsidies. The World Bank, IMF and International Energy Agency said support should protect vulnerable households and firms while countries avoid hoarding oil and avoid untargeted measures that lock in fiscal costs. (worldbank.org) What happens next depends less on one meeting or one waiver than on whether supply disruption eases. The IMF said a longer closure of the Strait of Hormuz or further damage to energy infrastructure would deepen the shock and prolong the inflation rebound now driving these policy moves. (imf.org)