Managing Director's Opening Remarks at the United States 2022 Article IV Press Conference

IMF News, June 24, 2022

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Date: June 24, 2022
The U.S. economy has staged a strong recovery from the COVID-19 shock supported by unprecedented fiscal and monetary support.
Unemployment rate has returned to end-2019 levels.
Output is close to its pre-pandemic trend.
Poverty has fallen.
8½ million jobs have been created since end-2020.
The recovery has supported the rebound in the global economy.

There has been a significant acceleration in wage and price inflation; pressures are broad based and go well beyond increases in energy and food prices.
Tackling inflation is a top priority of the administration; discussions with Secretary Yellen and Chair Powell confirmed strong commitment to bring inflation back down.
Responsibility to restore low and stable inflation rests with the Federal Reserve, which has a strong track record.
As inflation proved more persistent since the last Article IV consultation, the Federal Reserve signaled intent to pursue a much tighter policy stance and reiterated and deepened this guidance at the June FOMC meeting.
The IMF supports the path for the policy rate signaled by the Fed: to quickly get the federal funds rate to 3½ to 4 percent.
The IMF expects this policy path should create an up-front tightening of financial conditions which will quickly bring inflation back to target.
The IMF supports the Fed’s decision to reduce its balance sheet.
The Fed is expected to remain data dependent and to telegraph clearly where policy is likely to go; this is important for both the U.S. and the global economy.

Based on the policy path outlined at the June FOMC meeting, and an expected reduction in the fiscal deficit, the IMF expects the U.S. economy will slow.
The IMF notes a narrowing path to avoiding a recession in the U.S.
Important shocks continue to buffett the economy, including the Russian invasion of Ukraine and lockdowns in China.
Further negative shocks would inevitably make the situation more difficult.

The IMF has been strongly supportive of the administration’s “Build Back Better” agenda.
The IMF’s view: the policy package would help reshape the U.S. economy, release supply-side constraints, improve the safety net, support labor force participation, and incentivize investment and innovation.
The failure of the package to secure broader legislative support is a missed opportunity.
Recommendation: the administration should continue making the case for changes to tax, spending, and immigration policy to help create jobs, increase supply, and support the poor.

The administration’s goals include policies to facilitate a smooth, speedy transition to a low carbon economy; the IMF hopes relevant legislation can be approved quickly.
In an international context, the IMF has made the case for an international carbon price floor to jump-start emissions reductions.
The IMF supports other strategies including:
- sectoral feebates,
- regulatory restraints on emissions,
- the elimination of subsidies for fossil fuels and carbon-intensive agriculture,
- reprioritization of public spending toward mitigation and adaptation goals.
Recommendation: prioritize policies that help ensure workers and communities benefit from the transition so it improves living standards broadly.

U.S. authorities underlined commitment to an open, transparent, and rules-based system of international trade.
Given high inflation and strained supply chains, the IMF sees clear benefits in rolling back the tariffs introduced over the last five years.
There is scope for the U.S. to work with trading partners to address longstanding concerns and distortions in the global trading system.

Source: Managing Director's Opening Remarks at the United States 2022 Article IV Press Conference, June 24, 2022, IMF Communications Department