U.S. Economy Doing "Quite A Bit Better" Than Expected, Says IMF Chief

IMF Managing Director Kristalina Georgieva stated that the U.S. economy was performing "quite a bit better" than anticipated, although there was significant uncertainty surrounding the trade policies of President-elect Donald Trump's administration. This uncertainty was contributing to challenges for the global economy and pushing long-term interest rates higher.

Meanwhile, she also informed reporters on Friday that the IMF is set to release an updated World Economic Outlook on January 17. The forecast will predict stable global growth and continued disinflation, reflecting the IMF's outlook for the world economy in the coming months.

She mentioned that with inflation getting closer to the US Federal Reserve's target and data showing that the labor market remains stable, the Fed has the option to hold off on making any more interest rate cuts for now while waiting for more information. She also noted that, in general, interest rates are expected to stay "somewhat higher for quite some time" as the economy adjusts.

The IMF will release an updated global outlook on January 17, just days before Donald Trump takes office. This marks the first public indication of the IMF's revised global outlook for the year, as shared by Kristalina Georgieva. However, while her comments provided insight into the direction of the IMF's thinking, she did not offer detailed projections or specific figures regarding future economic trends.

In October, the IMF revised its 2024 economic growth projections, raising forecasts for the U.S., Brazil, and Britain, while cutting expectations for China, Japan, and the euro zone. The revisions were driven by concerns over several global risks, including the possibility of new trade wars, ongoing armed conflicts, and the impact of tight monetary policies. These factors were seen as potential obstacles to economic stability and growth in certain regions, prompting the IMF to adjust its outlook accordingly.

Georgieva pointed out that it was significant that the higher interest rates required to tackle inflation had not pushed the global economy into recession. However, she noted that inflation trends were varied across different regions, which meant that central banks would need to carefully monitor local data to adjust their policies accordingly.

She also warned that the strong US dollar could lead to higher funding costs for emerging market economies, with low-income countries being particularly vulnerable to these increased costs.

Georgieva highlighted that, after the significant fiscal spending during the COVID pandemic, most countries would need to scale back their expenditures to ensure economic stability. She emphasized the necessity for governments to adopt structural reforms that would promote durable, long-term growth. However, she also pointed out that, in many cases, these adjustments could be made in a way that would not undermine a country's growth prospects, allowing them to protect their economic future while ensuring fiscal responsibility.