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IMF says Fed should maintain interest rates until ‘at least’ the end of the year
International Monetary Fund (IMF) Managing Director Kristalina Georgieva speaks during the 2024 CNBC CEO Summit in Washington, DC, on June 4, 2024.
Shannon Finney | CNBC
The Federal Reserve should wait to cut interest rates until “at least” the end of the year, according to the head of the International Monetary Fund. The US is the only G20 economy recording growth above pre-pandemic levels, and the “robust” growth indicates continued upside risks to inflation, the 190-nation agency said.
“We recognize important 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 until at least the end of 2024.” The Fed’s current federal funds rate has been within a range of 5.25% to 5.50% since July 2023.
The IMF, often called the world body “creditor of last resort”, forecasts that the core personal consumption expenditures price index – the Fed’s preferred measure of inflation – will end 2024 at about 2.5% and reach the Fed’s 2% target rate by mid-2025, ahead of its own projection from the Fed to 2026.
US economic strength during the Fed’s rate hike cycle has been helped by labor supply and productivity gains, Georgieva said, while highlighting the need for “clear evidence” that inflation is falling to the 2% target before the Fed cuts rates.
However, the IMF’s “more optimistic” assessment of inflation’s downward trajectory is based on indications of a slowing US labor market and weakening consumer demand.
“I want to acknowledge that a lesson we learned from the last [few] years is that we are in a moment of greater uncertainty. That uncertainty also lies ahead. We are confident, however, that the Fed will overcome this, and certainly with the same prudence that it has demonstrated over the past year,” Georgieva said.
Correction: An earlier version of this article incorrectly mentioned Kristalina Georgieva’s name.