IMF Warns of Delayed Rate Cuts as US Inflation Lags Behind Target

The International Monetary Fund (IMF) has released its first Article IV review of the US economy, highlighting concerns about inflation and fiscal risks. According to the IMF, US inflation is unlikely to return to the Federal Reserve's target rate of 2% until early 2027.

This assessment suggests that the Fed may not lower interest rates as quickly as some had expected, which could have implications for various asset classes, including cryptocurrencies. The IMF also noted that the current account deficit in the US is 'too big,' estimating it at between 3.5% and 4% of GDP.

The Fund's Managing Director, Kristalina Georgieva, emphasized the need for fiscal consolidation to address this issue, rather than relying on tariffs or other measures. However, the administration's approach has been met with criticism, as the IMF projects that US federal deficits will remain between 7% and 8% of GDP in the coming years.

This trend is likely to lead to a significant increase in government debt, which could pose risks to both the US and global economies. The IMF warned that 'the upward path for the public debt-GDP ratio and increasing levels of short-term debt-GDP represent a growing stability risk.'