IMF expects Fed to start interest rates reduction next week as inflation drops
Date
9/15/2024 3:55:34 AM
(MENAFN) The International Monetary Fund (IMF) anticipates that the US Federal Reserve will start cutting interest rates as early as next week, driven by the ongoing decline in inflation within the world’s largest economy. Julie Kozack, an IMF spokesperson, shared in a press briefing on Thursday that inflation in the United States has been decreasing due to the Fed's monetary policy actions. The IMF projects that inflation will continue to move towards the Federal Reserve’s target of 2 percent, with core Personal Consumption Expenditures (PCE) inflation expected to end the year around 2.5 percent and return to the target by mid-2025.
Kozack highlighted that the Fed's efforts have been bolstered by significant improvements on the supply side and robust productivity growth. This progress has contributed to a more favorable inflation outlook, with fewer upside risks compared to earlier in the year. The recent economic data indicates a shift in the balance of risks, showing a cooling labor market and reduced inflationary pressures. As a result, the IMF sees it as appropriate for the Fed to commence a loosening cycle, as indicated by their recent communications.
In addition to these developments, Kozack noted the remarkable performance of the US economy over recent years. The process of disinflation has proven to be less costly than initially anticipated, and the US economy has managed to exceed its pre-pandemic GDP trend. This robust economic performance is not only beneficial for the United States but also has positive implications for the global economy.
Overall, the IMF's outlook reflects confidence in the US economic recovery and the effectiveness of the Federal Reserve's monetary policy measures. The anticipated rate cuts are seen as a response to a more stable inflation environment and a cooling labor market, which together suggest a more manageable path toward the Fed’s inflation target.
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