Transcript of United States 2021 Article IV Consultation Press Conference

IMF News, July 1, 2021

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The U.S. economy is "coming out on a strong footing" from the pandemic.
IMF staff projection: growth at 7 percent this year, "the fastest annual growth rate since 1984."
Outlook assumes the American Jobs Plan and American Families Plan are legislated later this year in forms similar to administration proposals.
The two packages are projected to:
- Add to near-term demand, "raising GDP by a cumulative 5.25 over '22 to '24."
- Leave GDP "1 percent higher, even after 10 years," through positive effects on labor force participation and productivity.
Emphasis that composition of fiscal packages matters "more than size."

Recent large consumer price movements noted; expected to continue for a few months.
IMF assessment: these inflationary pressures are "transitory" and driven largely by relative price movements as the economy rebounds.
Specific inflation projections cited:
- Core inflation could "get close to 4 percent by the end of this year."
- Inflation expected to be "around 2.5 percent by end of 2022."
The IMF does not view overheating as the most likely outcome but flags the risk of a sustained, fast rise in inflation.
Role of the Federal Reserve:
- The Fed's "flexible average inflation targeting framework" introduced last August provided timely accommodation.
- Importance of clear communication and forward guidance as asset purchases are scaled back and interest rates eventually rise.
- U.S. interest rate movements have global implications, especially for countries with high levels of dollar denominated debt.

The IMF welcomes bipartisan movement on physical infrastructure components and administration commitments to strengthen social safety nets and increase tax progressivity.
Policy measures highlighted for supporting disadvantaged groups and labor force participation:
- Paid family leave
- Refundable child tax credit
- Support for childcare and healthcare
- Investments in education
- Higher minimum wage
Labor force and demographic challenges:
- Acknowledgement of unfavorable demographic trends (aging population) that constrain labor supply.
- IMF supports policies to increase female labor force participation through childcare and early childhood development.
- Emphasis on skills upgrading and broader access to education (including college-level) to boost labor supply and productivity.
Fiscal packages are expected to boost sustained growth via productivity and participation rather than only short-term demand.

IMF message: "vaccine policy this year, most likely also next year, is economic policy."
Global vaccination targets stated by the IMF:
- 40 percent vaccinations at least by the end of this year.
- 60 percent by mid next year.
U.S. vaccination progress noted: "exceeding 50 percent" vaccination coverage, with improved economic performance expected when a country reaches 50 percent and more.
Concern about vaccine hesitancy and slowing vaccination rates as potential drags on recovery and sources of variant risk.

Global minimum corporate tax:
- Support for the proposal and welcome for "widespread support among 130 countries."
- 130 countries represent "90 percent of the world economy."
- IMF advocacy for simplicity and attention to developing-country specificities to ensure administrability.
Trade policy:
- Administration's commitment to an "open, transparent, rules-based international system" is welcomed.
- IMF view: increasing productivity, rolling back recent trade restrictions and tariffs, and ensuring a level playing field in federal procurement will support jobs and living standards.
- Emphasis that trade and ensuring benefits reach those left behind are complementary objectives.
Climate policy:
- Support for U.S. focus on reducing carbon emissions and boosting investment in mitigation and adaptation.
- Proposed measures welcomed include spending on green infrastructure and efforts to remove fossil fuel subsidies.
- IMF recommendation in this consultation: greater focus on curbing commissions in the agriculture sector and that "pricing carbon [is] best done through a federal carbon tax" for jobs, growth, and addressing the global climate challenge.

Strong U.S. growth is positive for global growth prospects.
USMCA relevance:
- Strong U.S. demand and higher imports are expected to generate significant spillovers, particularly benefiting Mexico and Canada.
- IMF staff note that Mexico and Canada "benefit a great deal" from increased U.S. demand, with many imports flowing from Canada to Mexico.

On holdouts to the global minimum tax: IMF confidence that the remaining countries can be brought on board; the initiative now has traction after years of limited progress.
On risks if fiscal packages do not pass or are smaller than assumed:
- Packages matter for maintaining momentum, productivity, and labor market participation.
- IMF will assess specific growth implications once the final package shapes are known.
On the CBO projection of slowing growth due to weak labor force growth:
- IMF notes its own projection incorporates the two fiscal packages, which raise growth estimates; demographic trends remain a constraint requiring policy responses to boost participation and skills.
On Buy American/procurement preferences:
- IMF stresses that a rules-based international trade system and domestic policies that address those left behind can be aligned; attention to domestic redistribution and adjustment measures is crucial.

Transcript: July 1, 2021 — IMF Communications Department