Opening Remarks by IMF Managing Director Christine Lagarde At the United States 2019 Article IV Press Conference

IMF News, June 6, 2019

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The U.S. economy will be in the longest expansion in recorded history.
Our expectation is that economic activity will grow by 2.6 percent this year and 1.9 percent in 2020.
This represents an increase in our 2019 growth forecast by around 0.3 percentage points.
Unemployment is at levels not seen since the late 1960s.
Wages and household incomes are rising while inflationary pressures in the U.S. remain very subdued.

Despite strong macroeconomic outcomes, benefits from the decade-long expansion have generally not been shared as widely as they could have been.
Social indicators highlighted as challenging:
- Average life expectancy has trended downward in recent years.
- Income and wealth polarization have increased.
- Social mobility has steadily eroded.
- Education and health outcomes are suboptimal.
- The poverty rate is falling but remains higher than in other advanced economies.
Policy measures emphasized to promote inclusive growth and support social mobility:
- Instituting paid family leave.
- Expanding the very effective Earned Income Tax Credit.
- Helping working families with child and dependent care.

The U.S. public debt is on an unsustainable path; policy adjustments are needed to lower the fiscal deficit and put public debt on a gradual downward path over the medium term.
Possible policy elements for a successful package (as stated):
- Steps to address the expected increases in entitlement spending on health and social security.
- To raise indirect taxes.
- To institute a federal carbon tax.

Financial market conditions improved markedly over the first few months of this year, supporting near-term growth by reducing the cost and increasing access to financing.
Concern noted that an abrupt reversal of financial market conditions could represent a material downside risk to the U.S.
- A sudden tightening of financial conditions could interact adversely with the high levels of corporate and public debt and create a feedback loop that would weigh on real activity and job creation.
- Such a shift would also have negative outward spillovers for corporates, sovereigns and financial institutions in other countries, particularly those with significant leverage or rollover needs in U.S. dollars.

The Federal Reserve indicated earlier this year it was pausing its process of raising interest rates; the IMF fully agrees with that approach.
The pause should give policymakers time to gauge the balance of risks to both inflation and employment outcomes and to build a clearer picture of whether further adjustments in the federal funds rate are warranted.
It is important for the Federal Reserve to remain data dependent and to continue to communicate well about its assessment of evolving economic conditions and its expectations for future monetary policy.

For the global economy to function well it needs a more open, more stable, and more transparent, rules-based international trade system.
Essential that the U.S. and its trading partners work constructively together to better address distortions in the trading system.
Trade tensions between the U.S. and its trading partners including China and Mexico represent a threat to the global outlook and create important negative spillovers to other countries.
These tensions should be quickly resolved through a comprehensive agreement that results in a stronger and more integrated international trading system.
"Nobody wins a trade war."

Highlighted bipartisan priority: the Federal, state and municipal governments' work to tackle the current opioid crisis in the U.S., noting the tragic human costs and the absence of easy solutions.

As prepared for delivery, June 6, 2019