The combination of high interest rates, a strong dollar and a slowdown will have negative effects on macro finances around the world.
The International Monetary Fund published its preliminary results on the state of the US economy after its official visit to the country, expecting an annual growth in gross domestic product of 1.7% in 2023, followed by 1% next year.
This slowdown is likely to be followed by a rise in the unemployment rate to around 4.5% by the end of 2024.
On inflation, the IMF has indicated that consumer prices will continue to decline, while inflation is expected to remain above the Fed’s 2% target range for the next two years.
“A firm return of inflation to the target will require a prolonged period of tightening monetary policy, with the federal funds rate remaining at 5.25-5.5% until the end of 2024,” the IMF said in a statement posted on its website.
In addition, the IMF also showed a scenario in which the US economy slows down more sharply, possibly in the next year, leading to a recession caused by tightening monetary policy.
In this case, the International Monetary Fund warned that the combination of high interest rates, a strong dollar and a sharp slowdown in business activity would have significant negative repercussions for macro finance around the world.