Finance
The IMF says the Fed should maintain interest rates until “at least” the end of the year
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
The head of the International Monetary Fund says the Federal Reserve should wait until “at least” the end of the year to cut interest rates. The US is the only G20 economy showing growth above pre-pandemic levels, and “robust” growth signals persistent upside risks to inflation, the 190-nation agency said.
“We recognize important upside risks,” IMF Managing Director Kristalina Georgieva said at a press conference on Thursday. “Given these risks, we agree that the Fed should keep policy rates at their current levels until at least the end of 2024.” The current Fed Funds rate has been in a range of 5.25% to 5.50% since July 2023.
The IMF, often called the global fund ‘borrower of last resort’ Projects the main price index for personal consumption expenditures – the Fed’s preferred inflation measure – to reach around 2.5% at the end of 2024 and reach the Fed’s 2% target by mid-2025, ahead of the Fed’s own projection for 2026.
U.S. economic strength during the Fed’s rate hike cycle has been helped by labor supply and productivity gains, Georgieva said, stressing the need for “clear evidence” that inflation is returning to the 2% target before the Fed cuts rates.
Nevertheless, the IMF’s “more optimistic” assessment of the downward inflation trajectory is based on indications of a cooling US labor market and weakening consumer demand.
“I want to acknowledge that this is a lesson we have learned from the past [few] year we find ourselves in a time of greater uncertainty. This uncertainty also lies ahead. However, we are confident that the Fed will get through this, and certainly with the same caution it has shown over the past year,” Georgieva said.
Correction: An earlier version of this article misstated Kristalina Georgieva’s name.
