The International Monetary Fund announced on Friday that U.S. interest rates will likely need to remain high for a longer period to tame inflation, adding that Washington needs to tighten fiscal policy to reduce its federal debts.
The IMF stated in a release following its "Article IV" review of U.S. policies that the U.S. economy has shown resilience in the face of tighter monetary and fiscal policies, but this means inflation has been more persistent than expected.
The fund noted, "While core and headline consumer spending inflation is expected to continue to decline throughout 2023, they will remain above the Federal Reserve's target of two percent during 2023 and 2024."
IMF Managing Director Kristalina Georgieva emphasized in a press conference that the U.S. government needs to reduce the deficit, particularly with increased tax revenues.
Georgieva expressed hope that a solution would be reached "within 12 hours" regarding the U.S. debt ceiling crisis in Washington, to avoid a catastrophic default that could add further shocks to the global economy.
The IMF’s review included growth projections for the entire year in the U.S. at 1.7 percent for 2023, slightly higher than its April forecast of 1.6 percent, with production expected to decline by 1.2 percent on a year-over-year comparison in the last quarter of the year.
