IMF: The Federal Reserve should keep interest rates unchanged at least until the end of the year
IMF President stated that the Federal Reserve should keep interest rates unchanged at least until the end of the year. IMF believes that the United States is the only country with economic growth above pre-pandemic levels, and strong growth indicates upward risks for inflation. IMF predicts that the core personal consumption expenditure price index will reach 2.5% by the end of 2024, earlier than the Federal Reserve's forecast for 2026. IMF's assessment of the downward trajectory of inflation is more optimistic, based on signs of cooling in the labor market and weakening consumer demand. Georgieva emphasized the need for clear evidence that inflation is falling to the 2% target before the Federal Reserve cuts interest rates
According to the Wise Finance APP, Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), stated that the Federal Reserve should wait until "at least" the end of the year before cutting interest rates. The International Monetary Fund, which has 190 member countries, stated that the United States is the only economy among the G20 countries that has economic growth higher than pre-pandemic levels. The "strong" growth indicates that inflation faces sustained upward risks.
Georgieva stated at a press conference on Thursday, "We do recognize important upside risks," and "Given these risks, we agree that the Federal Reserve should keep policy rates at their current level at least until the end of 2024." Since July 2023, the current federal funds rate of the Federal Reserve has been maintained within the range of 5.25% to 5.50%.
The IMF predicts that the core personal consumption expenditure price index - the Federal Reserve's preferred inflation gauge - will reach around 2.5% by the end of 2024 and achieve the Federal Reserve's 2% target rate by mid-2025, earlier than the Federal Reserve's own forecast for 2026.
Georgieva stated that during the Federal Reserve's tightening cycle, the strength of the U.S. economy benefited from improvements in labor supply and productivity. She also emphasized that there needs to be "clear evidence" that inflation is falling to the 2% target before the Federal Reserve cuts rates.
Nevertheless, the IMF's "more optimistic" assessment of the downward trajectory of inflation is based on signs of cooling in the U.S. labor market and weakening consumer demand.
Georgieva said, "I want to acknowledge that one lesson we have learned from the past few years is that we are in a more uncertain period. This uncertainty lies ahead as well. However, we are confident that the Federal Reserve will navigate through this challenging period and will certainly be as cautious as last year."