WASHINGTON –
The International Monetary Fund on Friday cut its forecast for US economic growth as the Federal Reserve aggressively raised interest rates denting demand but predicted that the United States would “nearly” avoid a recession.
In an annual review of U.S. economic policies, the IMF said it now expects U.S. Gross Domestic Product to grow 2.9% in 2022, less than its most recent forecast of 3 percent. .7% in April.
For 2023, the IMF cut its US growth forecast to 1.7% from 2.3% and now expects growth to bottom out at 0.8% in 2024.
Last October, the IMF predicted US growth of 5.2% this year, but since then, new COVID-19 variants and rudimentary supply chain disruptions have slowed the recovery. , while the spike in fuel and food prices due to Russia’s war in Ukraine continues to fuel inflation. The highest level in 40 years.
“We are aware that there is a narrowing path to avoiding a recession in the US,” IMF Managing Director Kristalina Georgieva said in a press conference. press conference, noting that the outlook is subject to a high degree of uncertainty.
“The economy continues to recover from the pandemic and significant shocks are supporting the economy from the Russian invasion of Ukraine and from the shutdowns in China,” she said. “Further negative shocks will certainly make the situation more difficult.”
If large enough, a shock could push the United States into a recession, but it is likely to be short and shallow with modest increases in unemployment, like the 2001 U.S. recession. Hemisphere Nigel Chalk of the IMF said. He added: “Strong US savings will help support demand.
Inflation cuts ‘pain’
Georgieva said price stability is important to protect US earnings and sustain growth, but there could be “some pain” for consumers in getting there.
She said her discussions with US Treasury Secretary Janet Yellen and Fed Chair Jerome Powell “leave no doubt about their commitment to bringing inflation back down.”
US inflation by the Fed’s preferred measure is running at more than three times the US central bank’s 2% target.
Georgieva said the responsibility for restoring low and stable inflation rests with the Fed, and the fund considers the US central bank’s desire to quickly bring the benchmark overnight benchmark interest rate to 3.5%-4% as a “policy”. right way to lower inflation.” The current Fed policy rate ranges from 1.50% to 1.75%.
“We believe this policy line will create a tightening in financial conditions, which will quickly bring inflation back to target. We also support the decision to reduce the balance sheet of the company. Fed,” she said.
While Congress’ failure to pass Biden’s spending and situation proposals is a “missed opportunity,” Georgieva has signaled that the IMF will support a scaled-down version.
“We think the administration should continue to introduce changes to tax, spending and immigration policies to help create jobs, increase supply and support the poor,” she said.
Georgieva also said the IMF sees clear benefits in rolling back US import duties imposed over the past five years, including punitive duties on Chinese imports and global tariffs on steel, aluminum and washing machines. and solar panels.
US Treasury spokesman Michael Kikukawa said the IMF statement showed the US economy was facing global challenges “from a strength” as a result of the economic policies of the Biden administration.
The Treasury also said Yellen, during his meeting with Georgieva, reiterated the importance of the IMF conducting a “frank and thorough review” of IMF member economies.
(Reporting by David Lawder and Andrea Shalal; Editing by Paul Simao and Richard Chang)
