Xinhua News Agency, Washington, July 1 (Reporter Gao Pan Xiong Maoling) The International Monetary Fund (IMF) said on July 1 that the US Federal Reserve may need to raise interest rates from the end of 2022 or the beginning of 2023 in view of the fact that the US inflation rate will continue to be higher than the target of 2% in the next few years.
On the same day, the IMF said in a statement concluding its consultation on Article IV of the United States that the economic growth rate of the United States is expected to reach 7% this year, higher than the 6.4% predicted in April. Large-scale fiscal stimulus has increased the possibility that the US inflation rate will continue to be higher than the 2% target. It is estimated that by the end of this year, the inflation rate measured by the US consumer price index will reach 4.3%, and it will slow down to 2.4% by the end of 2022, but it will remain above 2% in the following years.
The IMF believes that the rapid recovery of the US economy and additional financial support make it necessary for the Fed to consider changing its monetary policy in the coming months. The Fed may need to reduce the scale of asset purchases from the first half of 2022 and raise interest rates from the end of 2022 or early 2023.
The IMF believes that the main risk facing the US economy still comes from the COVID-19 epidemic, and it is necessary to continue to promote vaccination and make emergency plans to prevent the epidemic from rebounding. In addition, if the size of the fiscal expenditure bill finally passed by the US Congress is smaller than the Biden administration’s proposal, it will also pose a downside risk to the US economy.
The IMF pointed out that it is a serious concern that many trade-distorting measures introduced by the US government still exist in the past four years. In particular, the US government still maintains tariffs on imported steel and aluminum products, washing machines, solar panels and a series of China goods, and promises to give priority to American products in public procurement. The IMF calls on the US government to lift trade restrictions and impose tariffs, and strictly restrict the "Buy American" clause to make it conform to the international trade obligations of the United States.
The IMF pointed out that in the past four years, the United States launched countervailing investigations based on exchange rate undervaluation, and included exchange rate clauses in trade agreements, which also posed serious risks to the multilateral trading system and the international monetary system. Treating an undervalued exchange rate as a subsidy that should be offset may aggravate trade tensions and trigger trade retaliation. The IMF believes that the United States should cooperate constructively with its trading partners to better solve the macro-structural distortion that affects the external balance of payments and strengthen the rule-based multilateral trading system.
The fourth clause consultation is the routine judgment and evaluation of IMF economists on the economic performance and macro policies of member countries every year.