The International Monetary Fund (IMF) has stated that it is fitting for the U.S. Federal Reserve to initiate a long-anticipated monetary easing cycle during its upcoming meeting next week, as concerns over inflation risks have diminished.
IMF spokesperson Julie Kozack shared insights at a regular news briefing, indicating that the IMF anticipates a slowdown in the U.S. economy for the remainder of the year, which will be reflected in its updated World Economic Outlook forecasts set for October.
Kozack noted that the IMF projects the core U.S. personal consumption expenditures (PCE) inflation to conclude 2024 at 2.5 percent, with a return to the Fed’s 2 percent target by mid-2025. Recent data suggests reduced inflation risks along this trajectory, she added.
Kozack remarked that the anticipated initiation of a loosening cycle, as indicated by the Fed, seemed appropriate. She noted that, although inflation risks have decreased, they have not completely disappeared, and the Fed would need to carefully adjust the timing and extent of rate cuts based on upcoming economic data.
zIn late August, Fed Chair Jerome Powell supported the imminent commencement of rate cuts, expressing concerns that further deterioration in the job market would be undesirable, while affirming that inflation is nearing the Fed’s target. Other Fed officials, Reuters reported, have also indicated their readiness to implement rate cuts at the bank’s policy meeting on September 18.
Despite the slowing U.S. economy, GDP is projected to grow by about 2 percent by the end of 2024, compared to the fourth quarter of 2023. Kozack refrained from commenting on whether the IMF would revise its overall growth forecasts for the U.S., which currently estimate a 2.6 percent growth for 2024 and 1.9 percent for 2025.
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