IMF: US Federal Reserve is in a position to cut rates

The International Monetary Fund confirmed on Thursday that it still believes that the Federal Reserve may begin cutting interest rates later in 2024.

But he pointed out the importance of the US Central Bank remaining cautious, even with the decline in consumer prices in the United States in June, which reinforced expectations of an early cut in interest rates.

According to CNN, International Monetary Fund spokeswoman Julie Kozak told reporters that the slowdown in inflation in the United States continues, speaking after the release of a report showing a decline in the consumer price index by 0.1% in June 2024, recording its first monthly decline in four years. .

“We support the Fed’s data-driven and cautious approach to monetary policy, and we also expect the bank to be in a position to cut interest rates later this year, and this assessment remains valid,” Kozak added.

Kozak also noted that US growth has been remarkably strong and that significant federal spending during the coronavirus pandemic and investments in infrastructure, clean energy and semiconductors will have a lasting positive impact on the economy.

But she reiterated the recent policy advice provided by the International Monetary Fund for the United States to rein in its growing debt pile, saying: “Now the fiscal deficit is very high, and now is the time, especially now that the economy is strong, to take the necessary measures to establish the debt-to-GDP ratio.” “The aggregate is on a decisive downward path, and this will require a wide range of fiscal measures.”

The International Monetary Fund expects net US interest payments on federal debt to reach 3.2% of GDP in fiscal year 2024, which ends on September 30, up from 2.4% in fiscal year 2023 due to higher interest rates.

Kozak added that this ratio “will remain high even in the medium term” due to the high deficit and debt levels.