IMF Managing Director: "US Fed Should Maintain Current Interest Rate at Least Until Year-End"

Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), stated that the United States Federal Reserve (Fed) should maintain the current benchmark interest rate at least until the end of the year.

[Image source=EPA Yonhap News]

According to Bloomberg News and others, Georgieva said at a press conference on the 27th (local time) that the risk of inflation rebounding cannot be overlooked.

She pointed out that the U.S. economy remains robust and is the only one among the Group of Twenty (G20) countries to record growth exceeding the pre-COVID-19 pandemic level. She also indicated that this suggests inflation risks, emphasizing that the Fed needs clear evidence of achieving the 2% price stability target before starting to cut interest rates.

The IMF forecasted that the core Personal Consumption Expenditures (PCE) price index will rise by 2.5% by the end of this year and will only reach 2% by mid-next year. This is earlier than the Fed’s projection. The PCE price index is considered the Fed’s preferred inflation gauge.

However, Raphael Bostic, President of the Federal Reserve Bank of Atlanta, said that "inflation remains the biggest concern," but the Fed could cut rates once in the fourth quarter of this year. He stated, "There are plausible scenarios where rates could be cut more than twice, not cut at all, or even raised this year," adding, "We will act based on the data."

Meanwhile, the IMF projected that the U.S. economy will grow by 2.6% this year, which is a 0.1 percentage point downward revision from the forecast made in April. Georgieva also urged urgent solutions, citing the excessive size of the U.S. fiscal deficit.