IMF says Fed should hold interest rates where they are until ‘at least’ end of year


International Monetary Fund (IMF) Managing Director Kristalina Georgieva speaks during the 2024 CNBC CEO Council Summit in Washington, D.C. on June 4, 2024.
Shannon Finney | CNBC

The Federal Reserve should wait to cut interest rates until “at least” the end of the year, according to the head of the International Monetary Fund. The U.S. is the only G20 economy to see growth above pre-pandemic levels, and “robust” growth indicates ongoing upside risks to inflation, the 190-country agency said.

“We do recognize important upside risks,” IMF Managing Director Kristalina Georgieva said at a press briefing on Thursday. “Given those risks, we agree that the Fed should keep policy rates at current levels until at least late 2024.” The Fed’s current fed funds rate has stood within the range of 5.25% to 5.50% since July 2023.

The IMF, often called the world’s “lender of last resort,” forecasts that the core personal consumption expenditures price index — the Fed’s preferred measure of inflation — will end 2024 at around 2.5% and reach the Fed’s 2% target rate by mid-2025, ahead of the Fed’s own projection for 2026.

U.S. economic strength during the Fed’s rate-hike cycle was aided by labor supply and productivity gains, Georgieva said, while highlighting the need for “clear evidence” that inflation is coming down to the 2% target before the Fed cuts rates.

Nonetheless, the IMF’s “more optimistic” assessment of the downward inflation trajectory is based on indications of a cooling labor market in the U.S. and weakening consumer demand.

“I want to recognize that a lesson we learned from the last [few] years is we are at a time of more uncertainty. This uncertainty also lies ahead. We are confident, however, that the Fed will move through that, and certainly with the same prudence it has demonstrated over the last year,” Georgieva said.

Correction: A previous version of this article misstated Kristalina Georgieva’s name.

Products You May Like

Articles You May Like

Here’s some relief student loan borrowers can still count on — at least for now — amid legal challenges
San Francisco’s AI boom can’t stop real estate slide, as office vacancies reach new record
China gears up for next week’s Third Plenum meeting. Here’s why real estate isn’t likely the main focus
Here’s why housing inflation is still stubbornly high
Watch Fed Chair Jerome Powell testify live before Senate banking panel

Leave a Reply

Your email address will not be published. Required fields are marked *