International Monetary Fund (IMF) Managing Director Kristalina Georgieva speaks at the 2024 CNBC CEO Council Summit in Washington, DC on June 4, 2024.
Shannon Finney | CNBC
The head of the International Monetary Fund said the Federal Reserve should wait “at least” until the end of the year to cut interest rates. The 190-nation body said the United States is the only G20 nation growing above pre-pandemic levels and that “robust” growth points to continued risks to rising inflation.
“We see important upside risks,” IMF Managing Director Kristalina Georgieva said at a press conference on Thursday. “Given those risks, we agree that the Fed should keep its policy rates at their current levels through at least the second half of 2024.” The Fed's current federal funds rate has remained in a range of 5.25% to 5.50% since July 2023.
The IMF, often referred to as the world's “lender of last resort,” projects that the Fed's preferred inflation measure, the core personal consumption expenditures price index, will be about 2.5% by the end of 2024, sooner than the Fed's own 2026 forecast, and reach the Fed's 2% target by mid-2025.
Georgieva said the strength of the U.S. economy during the Fed's rate-hiking cycle has been supported by improving labor supply and productivity, and stressed that the Fed needs “clear evidence” that inflation is approaching its 2 percent target before cutting rates.
Still, the IMF's “more optimistic” assessment of the downward inflation trajectory is based on signs of a cooling U.S. labor market and weakening consumer demand.
“We want to recognize the lessons learned from the last war. [few] “We are in a more uncertain period than we've seen in years, and this uncertainty will continue. But we are confident that the Fed will navigate it with the same prudence it has shown over the past year,” Georgieva said.
Correction: An earlier version of this article misstated Kristalina Georgieva's name.