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The IMF has completed its latest assessment of the US economy and it paints a picture of sluggish growth and inflation slowly returning to target.

  • PCE inflation is 3.8% in 2023 and 2.6% in 2024
  • The unemployment rate is 3.8% in 2023 and 4.4% in 2024.
  • Fed funds rate 4.9% by end of 2024
  • Full report

The IMF projects the U.S. economy will remain resilient amid fiscal and monetary policy changes in 2022, with consumer demand leveraging accumulated savings and real disposable income growth. In particular, labor force participation has risen, the unemployment rate has fallen to historic lows, and real wages have outpaced inflation since mid-2022. Growth of 1.2 percent is forecast for 2024, despite a modest increase in the unemployment rate to 4.5 percent.

By 2021, significant reductions in poverty are expected due to wage increases for low-income workers, job growth, and government aid related to the pandemic. However, these developments are reversed in 2022 as pandemic benefits expire and real wage growth for low-income workers slows. Strong demand and labor market results have contributed to sustained inflation, with commodity inflation expected to stabilize and accommodation price growth to moderate. In the year Although expected to moderate in 2023, inflation will remain above the Federal Reserve’s 2% target through 2024. To curb inflation, an extended monetary policy is needed, with the proposed federal funds rate at 5.25-5.5% until the end of 2024. In the midst of economic uncertainty, The IMF said it was critical for the Federal Reserve to provide transparent policy rate assessments and maintain high interest rates for longer periods of time.