The International Monetary Fund on Friday slashed its U.S. economic growth forecast as aggressive Federal Reserve interest rate hikes cool demand but predicted that the United States would 'narrowly' avoid a recession.
The International Monetary Fund on Friday slashed its U.S. economic growth forecast as aggressive Federal Reserve interest rate hikes cool demand but predicted that the United States would "narrowly" avoid a recession.
Last October, the IMF predicted 5.2% U.S. growth this year, but since then, new COVID-19 variants and stubborn supply chain disruptions have slowed recovery, while a sharp spike in fuel and food prices prompted by Russia's war in Ukraine further stoked inflation to 40-year highs. If large enough, a shock could push the United States into a recession, but it would likely be short and shallow with a modest rise in unemployment, akin to the U.S. recession in 2001, said IMF Deputy Western Hemisphere Director Nigel Chalk. Strong U.S. savings would help support demand, he added. Georgieva said price stability was important to protect U.S. incomes and sustain growth, but there may be "some pain" for consumers in achieving it.
Georgieva said the responsibility to restore low and stable inflation rests with the Fed, and that the fund views the U.S. central bank's desire to quickly bring its benchmark overnight interest rate up to the 3.5%-4% level as "the correct policy to bring down inflation." The Fed's current policy rate ranges from 1.50% to 1.75%.
"We think the administration should continue making the case for changes to tax, spending, and immigration policy that would help create jobs, increase supply and support the poor," she said.
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