The International Monetary Fund (IMF) on the 25th (local time) predicted that the U.S. Federal Reserve (Fed) will cut the benchmark interest rate once this year.
In a U.S. economic outlook report released that day, the IMF projected that the interest rate would be 3.25%–3.50% at year-end. The U.S. rate is currently 3.50%–3.75%, and the IMF expects the Fed to lower it by 0.25 percentage point once within the year. The IMF's forecast is somewhat at odds with U.S. President Donald Trump's demand for a steep rate cut.
The IMF said the personal consumption expenditures (PCE) price index, a key gauge for rate decisions, will see a 0.5 percentage point boost early this year due to the Trump administration's tariff imposition, but the effect will gradually fade, bringing inflation down to the Fed's 2% target level by early next year.
As for employment, another indicator, it said growth will be "less than half the pace observed in the five years before the pandemic," but, considering the slowdown in population growth, it expects the average jobless rate to stay near "full employment" at around 4% through next year.
It forecast U.S. growth at 2.4% this year. That is the same as in the World Economic Outlook report released last month. Last year's U.S. growth rate was 2.2%.
The IMF also gave a negative assessment of the Trump administration's tariffs and immigration enforcement. The IMF warned that "higher tariffs impose costs such as distorting the allocation of productive resources, disrupting global supply chains, and undermining the benefits of world trade," adding that "uncertainty surrounding trade policy could lead to a larger‑than‑expected slowdown in activity."
It also said, "Stricter border enforcement and expanded deportations will reduce the size of the foreign‑born labor force over the coming years," and as a result, it expects "slower job growth, a modest rise in inflationary pressures, and a 0.4% reduction in activity through next year."