IMF Forecasts Only One U.S. Rate Cut This Year

The International Monetary Fund (IMF) has forecast that the U.S. Federal Reserve (Fed) will have limited room to cut interest rates this year, anticipating only one rate cut.

In its annual U.S. economic assessment report, the “Article IV Consultation,” released on April 2 (local time), the IMF stated, “Overall, there is not much room for policy rate cuts over the next year,” expressing this outlook.

IMF Plaque. Photo by Reuters and Yonhap News Agency

The IMF explained, “A greater degree of monetary easing would only be possible if labor market prospects deteriorate significantly and if inflationary pressures do not increase—including a rise in short-term inflation expectations due to higher oil and commodity prices.”

In a separate statement, the IMF added that since the Fed’s policy stance is close to neutral, “Given the rise in energy prices, the potential for this to pass through to core inflation, and the upward risks to global commodity prices, there is very little room for rate cuts this year.” The IMF also noted that these factors could further delay the achievement of the inflation target.

According to the IMF’s baseline outlook, the Fed’s benchmark interest rate is expected to reach a range of 3.25–3.5% by the end of the year. The current rate stands at 3.5–3.75%. The IMF stated, “This path will enable the economy to return to full employment and 2% inflation by the first half of 2027.”

The IMF projected that the U.S. gross domestic product (GDP) growth rate will remain at 2.4% this year, supported by fiscal policy and the expected rate cut. However, growth is forecast to slow to 2.1% in 2027.

This assessment was conducted before the outbreak of war between the United States, Israel, and Iran at the end of February, so the impact of the war has not been fully reflected. Nevertheless, the IMF noted that the war involving Iran “could further stimulate U.S. energy production.”

Regarding U.S. President Donald Trump’s tariff policy, the IMF stated, “So far, evidence suggests that the tariff burden has fallen mainly on American companies, with some being passed on to consumers.” The IMF added, “Given the costs and time required to reorganize supply chains in response to tariffs, the negative impact on growth will be significant in the short term, but could also persist in the long run.” The IMF estimated the average effective tariff rate at approximately 7–8.5%.

This content was produced with the assistance of AI translation services.