Scan to Download ios&Android APP

IMF slashes U.S. growth forecast, sees 'narrowing path' to avoid recession

By Reuters_News

20:00, 24 June 2022

Share this article

What You Need to Know

The week ahead update on major market events in your inbox every week. Subscribe
A file photo of the International Monetary Fund logo seen outside the headquarters building during the IMF/World Bank spring meeting in Washington, U.S., April 20, 2018.
A file photo of the International Monetary Fund logo seen outside the headquarters building during the IMF/World Bank spring meeting in Washington, U.S., April 20, 2018.

By David Lawder and Andrea Shalal

- The International Monetary Fund on Friday slashed its U.S. economic growth forecast due to more aggressive Federal Reserve interest rate hikes but predicted that the United States would "narrowly" avoid a recession.

In an annual assessment of U.S. economic policies, the IMF said it now expects U.S. GDP to grow 2.9% in 2022, compared with its most recent forecast of 3.7% in April. For 2023, the IMF cut its U.S. growth forecast to 1.7% from 2.3% and it now expects growth to trough at 0.8% in 2024.

Last October, before the COVID-19 wave fueled by the Omicron variant and well before Russia's invasion of Ukraine caused a sharp spike in fuel and food prices, the IMF predicted 5.2% U.S. growth in 2022.

"We are conscious that there is a narrowing path to avoiding a recession in the U.S.," IMF Managing Director Kristalina Georgieva said in a statement, noting that the outlook had a high degree of uncertainty.

"The economy continues to recover from the pandemic and important shocks are buffeting the economy from the Russian invasion of Ukraine and from lockdowns in China," she said. "Further negative shocks would inevitably make the situation more difficult."

Georgieva said her discussions with U.S. Treasury Secretary Janet Yellen and Fed Chair Jerome Powell "left no doubt as to their commitment to bring inflation back down."

U.S. inflation by the Fed's preferred measure is running at more than three times the U.S. central bank's 2% target.

Georgieva said the responsibility to restore low and stable inflation rests with the Fed, and that the Fund views the U.S. central bank's desire to quickly bring its benchmark overnight interest rate up to the 3.5%-4% level as "the correct policy to bring down inflation." The Fed's policy rate is currently in a range of 1.50% to 1.75%.

"We believe this policy path should create an up-front tightening of financial conditions which will quickly bring inflation back to target. We also support the Fed's decision to reduce its balance sheet," she said.

Georgieva said the IMF strongly supported U.S. President Joe Biden's proposed $1.9 trillion "Build Back Better" spending package of climate and social spending because it would help reshape the U.S. economy by increasing labor force participation, reducing supply constraints and incentivizing investment and innovation. Lack of support in Congress "represents a missed opportunity," she said

She also signaled that the IMF would support a scaled-down version of this agenda, saying: "We think the administration should continue making the case for changes to tax, spending, and immigration policy that would help create jobs, increase supply and support the poor."

Georgieva also said the IMF sees clear benefits to rolling back the U.S. import tariffs that were imposed over the last five years, which include punitive duties on Chinese imports and global tariffs on steel, aluminum, washing machines and solar panels.

What You Need to Know

The week ahead update on major market events in your inbox every week. Subscribe
The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Still looking for a broker you can trust?


Join the 427.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account

2. Make your first deposit

3. You’re all set. Start trading