Georgieva made evaluations about the country’s economy at the press conference where the leading findings of the audit within the scope of the 4th article consultation on the US economy were shared.
Stating that the US economy has proven to be resilient, Georgieva said consumer demand is well-protected, initially supported by savings and more recently by a rise in disposable income.
Georgieva stated that they expect the US economy to grow by 1.2 percent annually this year and maintain its momentum until 2024.
Pointing out that they expect unemployment to rise gradually and approach 4.5 percent by the end of 2024, Georgieva emphasized that the labor market is still quite strong.
Georgieva described the resilient demand and strong labor market as a “double-edged sword”, adding that this has helped support American families while also contributing to inflation being more persistent than expected.
Inflation expected to stay above Fed’s target
Stating that they expect core inflation to gradually decline to around 4 percent towards the end of this year, Georgieva stated that they expect inflation to remain above the Fed’s medium-term target throughout 2024.
“Getting inflation back to the 2 percent target definitively will require prolonged tight monetary policy,” Georgieva said. said.
Stating that they expect interest rates to stay between 5.25 percent and 5.5 percent until the end of 2024, Georgieva said, “Interest rates will have to be a little higher for a longer period of time.” made its assessment.
Pointing out that there is still high uncertainty about the economy and inflation dynamics, Georgieva emphasized the importance of careful communication by the Fed.
Emphasis on “More needs to be done to reduce public debt”
IMF Director Georgieva also stated that more should be done to reduce the public debt of the USA.
Stating that the maintenance of open trade policies has contributed significantly to the growth of the US economy, Georgieva said that the global concerns about the resilience of supply chains have increased in the last few years, in this context, the recently enacted laws such as the Inflation Reduction Act and the CHIPS Act. and reminded that it includes provisions to support services.
Georgieva stated that this creates a risk of disintegration in the global supply chain and triggering retaliatory actions by trade partners, and expressed concern that this will ultimately be bad for US economic growth, productivity and employment.
Call to reach “as soon as possible solution” on debt limit
Answering questions about the debt limit impasse in the US, Georgieva said, “We want to see a solution as soon as possible.” said.
Georgieva emphasized that reaching a good conclusion on the debt limit is “very important” for the US and world economy.
In the statement where the pioneering findings of the IMF’s article 4 consultation on the US economy were shared, it was warned that the tension on the debt limit could create more systemic risks for both the US and the global economy at a time when there are already visible tensions.
The statement stressed the need to immediately increase or suspend the debt limit by Congress to avoid exacerbation of downside risks, allowing negotiations on the fiscal 2024 budget to begin in earnest.
It was noted that a more permanent solution should be found through institutional changes to this impasse, which has been experienced before.