The world is at risk of a “sluggish and disappointing decade”, the head of the International Monetary Fund has warned, while urging vigilance to restore price stability and jumpstart economic growth.

Kristalina Georgieva, managing director of the IMF, said: “Without a course correction, we are … heading for the Tepid Twenties”. She urged governments to make reforms, including cutting red tape and improving access to capital, that could boost growth.

Inflation is easing faster than expected but has not been fully defeated, she said, urging central bankers to carefully calibrate their decisions on cutting interest rates to incoming data.

She said headline inflation for advanced economies was 2.3pc in the final quarter of 2023, down from 9.5pc just 18 months ago, and the downward trend was expected to continue in 2024.

That would create the conditions for central banks in major advanced economies to begin cutting rates in the second half of the year, although the pace and timing would vary, she told an event hosted by the Atlantic Council think tank.

“On this final stretch, it is doubly important that central banks uphold their independence,” Ms Georgieva said, urging policymakers to resist calls for early rate cuts when necessary.

“Premature easing could see new inflation surprises that may even necessitate a further bout of monetary tightening. On the other side, delaying too long could pour cold water on economic activity,” she said.

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