IMF says US should raise taxes and wait until late 2024 to cut rates

The International Monetary Fund said Thursday that the Fed should not cut interest rates until “late 2024” and that the government needs to raise taxes to curb rising federal debt, including that of households earning less than the $400,000-a-year threshold set by President Joe Biden.

The guidelines are contained in the detailed report by the staff of the IMF’s annual “Article IV” review of U.S. economic policies released on Thursday.

The Fund has stressed in recent weeks the need for greater fiscal prudence as U.S. deficits continue to widen despite solid economic growth, and as Republicans and Democrats formulate tax and spending proposals ahead of the November presidential election.

IMF chief economist Pierre-Olivier Gourinchas told Reuters on Tuesday that the Fed could afford to wait longer to begin easing monetary policy given a strong labor market. But the staff report specifies that this shift should occur “by late 2024,” to avoid further upside surprises in inflation data.

“Given the significant upside risks to inflation (which were clearly highlighted by data results earlier this year), it would be prudent to lower the policy rate only after there is clearer evidence in the data that inflation is sustainably returning to the 2% target,” he added.

Connect with the Voice of America! Subscribe to our channels Youtube, WhatsApp and to newsletter. Turn on notifications and follow us on Facebook, X and Instagram.