Key Takeaways
The International Monetary Fund (IMF) has projected that the US economy will grow slower next year, warning that high inflation could keep interest rates high globally for a long time. The IMF projected US economic growth to be 2.6% in 2024 and 1.9% next year.
The International Monetary Fund (IMF) expects U.S. growth to slow next year and has warned that interest rates could remain high for a long time as inflation remains high.
In its latest World Economic Outlook, the IMF predicted that the U.S. economy will grow by 2.6% in 2024 and 1.9% next year due to “a weakening labor market and slowing consumption.”
The group maintained its forecast for global economic growth in 2024 at 3.2 percent and raised its forecast for next year to 3.3 percent from 3.2 percent previously.
IMF says high inflation is a harbinger of long-term high interest rates
The IMF said inflation remained robust, supported by rising services prices and wages, as well as geopolitical trade stresses, portending higher interest rates for the long term.
“Service inflation is impeding disinflationary progress and complicating monetary policy normalization,” the IMF wrote. “Increasing trade tensions and growing policy uncertainty increase the risks of rising inflation and raise the possibility that interest rates will remain elevated for longer.”
Still, the IMF said lower energy prices and a “moderate cooling in labor markets” should see inflation return to global central bank targets by the end of 2025.
Federal Reserve Chairman Jerome Powell and his colleagues who set U.S. monetary policy have said they need confidence that price pressures are easing before making any far-reaching interest rate cuts.