IMF CHIEF GEORGIEVA URGES US INTEREST RATE CAUTION

WASHINGTON, June 28 (Bernama-dpa) — The International Monetary Fund (IMF) warned the US Federal Reserve on Thursday against lowering interest rates too early,  German news agency (dpa) reported.

“The policy rate should be lowered only after there is a clear evidence that inflation is sustainably returning to the 2 per cent target,” IMF chief Kristalina Georgieva said in Washington.

The IMF asserted that the central bank of the world’s largest economy should keep the key interest rate at its current level at least until the end of 2024. The IMF agreed with the Fed that the central bank needed to be “cautious”.

It further predicted that the inflation rate will drop to the 2 per cent level by mid-2025, making the IMF slightly more optimistic than the Fed.

The Fed had recently made clear that it is in no hurry to cut interest rates. Following its mid-June meeting, the central bank hinted at only one rate cut for the current year, a departure from the previously projected three rate moves.

Georgieva stressed that this caution was appropriate.

Central banks raise interest rates to curb demand. For the Fed, the fight against high consumer prices is a balancing act. If interest rates are too high, there is a risk of recession. However, the US economy has remained surprisingly strong despite high rates.

The IMF emphasised on Thursday that the US economy has been “remarkably strong” and exhibited healthy economic growth. 

“The US is the only G20 economy whose GDP level now exceeds the pre-pandemic level. This is good for the US and it is good for the global economy,” Georgieva said.

— BERNAMA-dpa

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