International Monetary Fund (IMF) Managing Director Kristalina Georgieva speaks during the CNBC CEO Council Summit 2024 in Washington, DC on June 4, 2024.
Shannon Finney | CNBC
According to the head of the International Monetary Fund, the Federal Reserve should wait “at least” until the end of the year before cutting interest rates. The US is the only G20 economy with growth above pre-pandemic levels and “robust” growth suggests continued upside risks to inflation, the 190-country agency said.
“We see significant upside risks,” IMF Managing Director Kristalina Georgieva said at a news conference on Thursday. “Given these risks, we agree that the Fed should keep interest rates at current levels at least through the end of 2024.” The Fed’s current key interest rate has been in 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 be around 2.5% at the end of 2024 and will reach the Fed’s target rate of 2025 by mid-2025 will reach 2%, ahead of the Fed’s own forecast for 2026.
The U.S. economic strength during the Fed’s rate-hiking cycle has been bolstered by labor supply and productivity gains, Georgieva said, while stressing the need for “clear evidence” that inflation is falling to the 2 percent target before the Fed cuts rates.
Still, the IMF’s more “optimistic” assessment of the downward trend in inflation is based on signs of a slowing U.S. labor market and weaker consumer demand.
“I want to acknowledge that this is a lesson we learned from the last game [few] It has been years since we find ourselves in a time of greater uncertainty. This uncertainty also lies ahead of us. “However, we are confident that the Fed will see this through, certainly with the same prudence that they showed last year,” Georgieva said.
Correction: An earlier version of this article misstated Kristalina Georgieva’s name.
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2024-06-27 20:28:43
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