IMF Executive Board Concludes 2024 Article IV Consultation with the United States

IMF News, July 18, 2024

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U.S. economy "turned in a strong performance over the past few years."
Hysteresis effects from the pandemic did not materialize; both activity and employment now exceed pre‑pandemic expectations.
Real incomes were diminished by the unexpected rise in inflation in 2022 but have now risen above pre‑pandemic levels.
Job growth: "16 million new jobs created since end-2020."
Wealth and income gains have been uneven across the income distribution; poverty remains high, particularly following the expiration of pandemic-era support.

The Federal Reserve raised the policy rate by "525bps" in response to record-high inflation, reinforcing policy credibility and anchoring wages and prices.
PCE inflation: "2.7 percent in April (down from a peak of 7.1 percent in 2022)".
IMF staff expectation: PCE inflation "is expected to return to 2 percent by mid-2025."
Directors' guidance: "the Federal Reserve should not reduce its policy rate until there is clearer evidence that inflation is sustainably returning to its 2 percent target."
Monetary tightening was cushioned by supply-side gains, including expanded labor supply from immigrant inflows, and strengthened household and corporate balance sheets due to wealth gains and limited refinancing needs.

Under current policies, "general government debt is expected to rise steadily and exceed 140 percent of GDP by 2032."
General government fiscal deficit and debt, as shares of GDP, "are both projected to remain well above pre-pandemic forecasts over the medium-term."
The general government deficit is expected to remain "around 2½ percent of GDP above the levels forecast at the time of the 2019 Article IV consultation."
Directors emphasized the need for a "frontloaded fiscal adjustment, through both revenue and spending measures," and recommended redirecting some fiscal savings to programs to alleviate poverty.
Directors noted that "a structural and long‑term solution to address the issues related to the debt ceiling would also be beneficial."

Several steps taken to strengthen Treasury market functioning and insulate money market funds from liquidity shortfalls.
The pace of shrinking of the Federal Reserve’s balance sheet "has begun to taper."
Concrete actions have been lacking in mitigating banking system vulnerabilities revealed in 2023.
Directors called for full implementation of the final components of the Basel III agreement, increased regulatory requirements for mid‑sized banks, and strengthened supervisory oversight and practices.
Directors encouraged authorities to address remaining FSAP recommendations.

Directors welcomed the U.S. voluntary assessment of transnational aspects of corruption and encouraged implementation of remaining OECD Working Group on Bribery phase IV recommendations.
Directors highlighted the role of migrant inflows in easing supply‑demand imbalances and noted that "a more orderly approach to immigration would be desirable."
Directors emphasized the importance of continuing to address climate-related challenges.
Directors warned that the "ongoing intensification of trade restrictions as well as the domestic content provision in various fiscal programs" create risks for both the U.S. and global economy and urged authorities to unwind obstacles to free trade and bolster competitiveness via investment in workers and infrastructure.
Working with international partners to strengthen the WTO and ensure a robust and modern multilateral rules‑based system was recommended.

Welcomed the remarkable U.S. performance and the relatively light toll of disinflation on activity.
Emphasized monitoring upside risks to inflation and the need for determined actions to address fiscal imbalances, financial vulnerabilities, and increased inequality and poverty.
Commended authorities for commitment to price stability and successful disinflation, while urging caution on policy rate cuts.
Called for concrete actions to mitigate remaining banking vulnerabilities and full implementation of international regulatory standards.
Encouraged continued reforms and measures addressing corruption, migration, trade, and climate challenges.

Real GDP (annual growth): 2022: 1.9, 2023: 2.5, 2024: 2.6, 2025: 2.0, 2026: 2.1, 2027: 2.1, 2028: 2.1, 2029: 2.1
Real GDP (q4/q4): 2022: 0.7, 2023: 3.1, 2024: 1.8
Output gap (% of potential GDP): 2022: 0.4, 2023: 0.6, 2024: 0.2, 2025: -0.2, 2026: -0.1
Unemployment rate (q4 average): 2022: 3.6, 2023: 3.7, 2024: 4.2, 2025: 4.3, 2026: 4.1, 2027: 4.0, 2028: 3.9
Current account balance (% of GDP): 2022: -3.8, 2023: -3.0, 2024: -2.9, 2025: -2.8, 2026: -2.5, 2027: -2.2, 2028: -1.9, 2029: -1.6
Federal funds rate (end of period): 2022: 4.4, 2023: 5.4, 2024: 5.1, 2025: 2.9
Ten-year government bond rate (q4 avg.): 2022: 3.8, 2023: 3.5, 2024: 3.2
PCE inflation (q4/q4): 2022: 5.9, 2023: 2.8, 2024: 2.4
Core PCE inflation (q4/q4): (no values provided)
Federal government fiscal balance (% of GDP): 2022: -5.4, 2023: -6.3, 2024: -6.8, 2025: -6.6, 2026: -6.1, 2027: -5.6, 2028: -5.3
Federal government debt held by the public (% of GDP): 2022: 95.8, 2023: 97.3, 2024: 99.2, 2025: 102.1, 2026: 104.7, 2027: 106.3, 2028: 108.1, 2029: 109.5
General government fiscal balance (% of GDP): 2022: -4.1, 2023: -7.6, 2024: -7.8, 2025: -7.2, 2026: -6.7, 2027: -6.5
General government gross debt (% of GDP): 2022: 119.8, 2023: 120.7, 2024: 123.2, 2025: 126.7, 2026: 129.6, 2027: 131.8, 2028: 134.0, 2029: 135.9

IMF Executive Board Concludes 2024 Article IV Consultation with the United States, Press Release No. 24/281 (July 17, 2024).