The world economy is showing signs of resilience this year despite persistent inflation and a slow recovery in China, the International Monetary Fund said on Tuesday, raising the likelihood that a global recession can be avoided unless unexpected crises strike.

Signs of optimism in the IMF’s latest World Economic Outlook may also give global policymakers further confidence that their efforts to curb inflation without causing serious economic damage are working. But global growth is modest by historical standards, and the fund’s economists have warned that serious risks remain.

The IMF raised its global growth forecast for this year to 3 percent from 2.8 percent in its April projection. It forecast global inflation to fall from 8.7 percent in 2022 to 6.8 percent this year and 5.2 percent in 2024 as the effects of higher interest rates ripple across the globe.

The outlook was largely rosier as financial markets — which had been rocked by the collapse of several major banks in the United States and Europe — largely stabilized. Another major financial risk was averted in June when Congress acted to lift the U.S. government’s borrowing ceiling, ensuring the world’s largest economy continues to pay its bills on time.

The new figures from the IMF come as the Federal Reserve is widely expected to raise interest rates by a quarter point at its meeting this week, leaving its future options open. The Fed has been aggressively raising rates in an effort to tame inflation, lifting them from near zero until March 2022 to today’s range of 5 to 5.25 percent. Policymakers have sought to cool the economy without crushing it, holding rates steady in June to assess how the U.S. economy absorbs the higher borrowing costs the Fed has already approved.

As countries like the United States continue to struggle with inflation, the IMF urged central banks to remain focused on restoring price stability and strengthening financial supervision.

Fed officials will release their July interest rate decision on Wednesday, followed by a news conference with Fed Chairman Jerome H. Powell. Policymakers have previously predicted they may raise rates one more time in 2023, beyond the move expected this week. While investors doubt they will ultimately make that final rate move, officials will likely want to see more evidence that inflation is falling and the economy is cooling before committing in any direction.

The IMF said on Tuesday it expects growth in the United States to slow from 2.1 percent last year to 1.8 percent in 2023 and 1 percent in 2024. It expects consumption, which has remained strong, to begin to weaken in coming months as Americans draw on their savings and interest rates rise further.

Eurozone growth is expected to reach just 0.9 percent this year, dragged down by a slump in Germany, the region’s largest economy, before accelerating to 1.5 percent in 2024.

European politicians are still busy with the fight to slow down inflation. On Thursday, the European Central Bank is expected to raise interest rates for the 20 countries that use the euro to the highest level since 2000. But after a year of rate hikes, central bank policymakers are trying shift the focus from how high rates will go to how long they can stay at the levels designed to restrain the economy and suppress domestic inflationary pressures generated by rising wages or corporate profits.

Policymakers raised rates as the economy proved somewhat more resilient than expected this year, supported by a strong labor market and lower energy prices. However, the economic outlook is still relatively weak and some analysts expect the European Central Bank to be close to halting interest rate hikes as its restrictive policies weigh on economic growth. On Monday, index of economic activity in the eurozone fell to an eight-month low in July as manufacturing contracted further and the services sector slowed.

Next week, the Bank of England is expected to raise interest rates for the 14th time in a row in an effort to reduce inflation in Britain, where prices rose by 7.9 percent in June from the previous year.

Britain has defied some expectations, including economists at the IMF, by avoiding recession so far this year. But the country still faces challenging set of economic factors: Inflation is proving stubbornly persistent in part as a tight labor market pushes up wages, while households increasingly worry about the impact of high interest rates on their mortgages as repayment rates tend to reset every few years.

A weaker-than-expected recovery in China, the world’s second-largest economy, is also weighing on global output. The IMF pointed to a sharp decline in China’s real estate sector, weak consumption and tepid consumer confidence as reasons for concern about China’s outlook.

Official data released this month showed China’s economy slowed sharply in the spring from earlier in the year as exports fell, a property slump deepened and some indebted local governments had to cut spending after running out of cash.

Despite the reasons for optimism, the IMF report makes it clear that the global economy is not in the clear.

Russia’s war in Ukraine remains a threat that could send global food and energy prices higher, and the fund noted that a recently ended deal that allowed Ukrainian grain exports could present headwinds.

“The war in Ukraine could intensify and further increase the prices of food, fuel and fertilizers,” the report said. “The recent suspension of the Black Sea Grain Initiative is worrying in this regard.”

It also reiterated its warning that the war in Ukraine and other sources of geopolitical tension would further split the world economy.

“Such developments could contribute to further volatility in commodity prices and hinder multilateral cooperation in the provision of global public goods,” the IMF said.