Inflation is easing faster than expected but has not been fully defeated, International Monetary Fund chief Kristalina Georgieva said on Thursday, urging central bankers to carefully calibrate their decisions on cutting interest rates to incoming data.

Georgieva said headline inflation for advanced economies was 2.3% in the final quarter of 2023, down from 9.5% 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," 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.

Georgieva said next week's World Economic Outlook would show that global growth is marginally stronger given robust activity in the United States and in many emerging market economies, but gave no specific new forecasts.

She said the global economy's resilience was being helped by strong labor markets and an expanding labor force, strong household consumption and an easing of supply chain issues, but said there were still "plenty of things to worry about."

"The global environment has become more challenging. Geopolitical tensions increase the risks of fragmentation ... and, as we learned over the past few years, we operate in a world in which we must expect the unexpected," Georgieva told an event hosted by the Atlantic Council think tank.

She said global activity was weak by historical standards and prospects for growth had been slowing since the global financial crisis of 2008-2009. The global output loss since the start of the COVID-19 pandemic in 2020 was $3.3 trillion, disproportionately hitting the most vulnerable countries.

Georgieva said the U.S. had seen the strongest rebound among advanced economies, helped by rising productivity growth. Euro area activity was recovering more gradually, given the lingering impact of high energy prices and weaker productivity growth.

Among emerging market economies, countries like Indonesia and India were faring better, but low-income countries had seen the most severe scarring.

Given a significant and broad-based slowdown in productivity growth, the IMF's five-year outlook for global growth was just above 3%, well below its historical average of 3.8%, she said.

"Without a course correction, we are ... heading for 'the Tepid Twenties' - a sluggish and disappointing decade," Georgieva said, urging continued vigilance to restore price stability, rebuild fiscal buffers and jumpstart growth.

She said foundational reforms, such as strengthening governance, cutting red tape, increasing female labor market participation and improving access to capital could lift output by 8% in four years, she said.

Even more was possible with policies to encourage economic transformation, speeding up the green and digital transition, which could offer huge opportunities for investment, jobs and growth, she said.

Artificial intelligence offered huge potential benefits but also risks, with a recent IMF study showing that AI could affect up to 40% of jobs across the world and 60% in advanced economies, Georgieva said.

(Reporting by Andrea Shalal; Editing by Chizu Nomiyama)