International Monetary Fund Managing Director Kristalina Georgieva said that the Federal Reserve should be able to start cutting interest rates before the end of 2024.
Zhitong Finance learned that International Monetary Fund (IMF) Managing Director Kristalina Georgieva said that the Federal Reserve should be able to start cutting interest rates before the end of 2024. Georgieva said, “We still expect that by the end of this year, the Federal Reserve will take some action to lower interest rates. But don't rush until the data tells you you can do it.”
Prior to Georgieva's comments, hot US CPI data for March released on Wednesday — reflecting price growth far above the 2% inflation target — weighed on market expectations for the Fed to cut interest rates. According to data from the CME Federal Reserve Watch Tool, federal funds futures pricing data shows that the first rate cut may take place in September. These concerns have led to a recent decline in the US stock market, with the benchmark S&P 500 falling nearly 2% since the beginning of April. However, data released on Thursday showed that concerns about inflation abated, and the US PPI rose 0.2% month-on-month in March, slightly lower than the expectations of economists surveyed by the Dow Jones.
Georgieva said that the Federal Reserve should continue to pay attention to economic data, which will indicate when it is appropriate to start reducing borrowing costs. She said that people should be optimistic about America's future because compared to other places, labor costs in the US do not have that much upward pressure. She also pointed out that the US government can play a relatively greater role in preventing the economy from overheating, which is another reason to be optimistic about America's financial health.
However, Georgieva warned that keeping interest rates high for longer than expected could pose risks to financial stability in other parts of the world. At the same time, she said that as the situation changes, the possibility that the world's central banks will follow the direction of the Federal Reserve will decrease. “Inflation is falling,” she said. However, it hasn't reached the level we'd hoped for.”