The US economy is performing well, but the government should look for ways to strengthen its fiscal position in the medium term by reducing spending and raising more revenue the IMF signaled Thursday, (June 27) in Washington, D.C. 

The world’s largest economy is now expected to grow by 2.6 percent this year, down 0.1 percentage point from the International Monetary Fund’s previous forecast in April, but still the key driver in global growth, Managing Director Kristalina Georgieva told reporters. 

“The US is the only G20 economy whose GDP level now exceeds the pre-pandemic level. This is good for the US and it is good for the global economy.  We expect growth to be a healthy 2% this year on a four quarter over four quarter basis, and sustain a similar pace over the medium term,” Georgieva said after publishing the results of the annual Article IV ‘health check’ report on the US economy. 

The IMF projects that inflation is coming down to target in the coming year, which is slightly faster than the US Federal Reserve forecasts. 

“We expect core PCE inflation to end this year around 2.5%, and be back to target by mid-2025. This being said, we do recognize there are important upside risks to this path. Given those risks, we agreed that the Fed should keep policy rates at current level until at least late 2024,” said Georgieva. 

Georgieva met with US Fed Chair Jerome Powell and US Treasury Secretary Janet Yellen to discuss the findings of the annual report. She told reporters that it is the Fund’s responsibility to provide an honest assessment to all members, but respect their political independence and national sovereignty to make economic decisions impacting their people. 

She noted that US debt is rising, and it would be wise to tackle that borrowing now rather than wait until the next crisis or downturn. 

“Now, when there is a strong economy, it is the time to arrest and reverse this trend.  The US has put in place significant fiscal legislation in ‘21, ‘22. This legislation will have a lasting positive impact in reshaping the US economy. It needs to be complemented, however, with actions to put public debt to GDP on a decisive downward path through a broad range of policies that include raising tax revenues, addressing structural imbalances, and entitlement programs and looking for savings in non-entitlement spending,” Georgieva noted. 

Reporters asked if the US would face problems servicing its debt if other countries and investors began to avoid treasuries and worry about being paid back. Georgieva noted that since the Pandemic, actually more money was flowing in to the US from foreign investors. 

“So here we are in, in a in a country where when you look at the, debt servicing costs, they remain quite manageable. In a country where the economy is performing extremely well, where the good performance is driven by productivity. And when we look at these conditions, we actually think that, fast forward, the US can carry this debt, and, and, you know, we see no signs of the, interest in investing in US economy to weaken,” she said 

A copy of the full transcript is available at IMF.org