{
  "title": "Transcript of Press Conference on the Conclusion of the 2019 Article IV Consultation with the United States",
  "publication": "IMF News, June 6, 2019",
  "sourceUrl": "https://www.imf.org/en/news/articles/2019/06/07/tr060619-united-states-transcript-of-press-conference-conclusion-2019-article-iv-consultation",
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  "summary": "The U.S. economy is described as approaching \"the longest expansion in recorded history.\"",
  "publishDate": "2019-06-06",
  "sections": [
    {
      "heading": "Economic performance and outlook",
      "content": "- The U.S. economy is described as approaching \"the longest expansion in recorded history.\"\n- Growth projections:\n  - \"the economy will grow this year at about 2.6% percent\"\n  - \"next year at around 2 percent\"\n  - This \"represents an increase from our initial growth forecast by point 3 percent\"\n- Labor market:\n  - \"unemployment is at levels not seen since the late 60s\"\n  - \"wages and households’ incomes are rising\"\n- Inflation: \"inflation pressures in the U.S. remains very subdued\""
    },
    {
      "heading": "Social indicators and inclusiveness",
      "content": "- Noted adverse trends:\n  - \"Average life expectancy has trended downwards in recent years\"\n  - \"Income and wealth polarization have increased\"\n  - \"social mobility has steadily eroded\"\n  - \"education and health outcomes are suboptimal\"\n  - \"while the poverty rate is falling it remains higher than in any other advanced economies\"\n- Recommendations to promote inclusive and sustainable growth:\n  - \"Instituting paid family leave\"\n  - \"expanding the very effective Earned Income Tax Credit\"\n  - \"helping working family with child and dependent care\"\n  - Continued multi-level government efforts to \"tackle the current opioid crisis\""
    },
    {
      "heading": "Markets and financial risks",
      "content": "- Financial market conditions \"have improved markedly\" in the first months of the year, supporting near-term growth by reducing financing costs.\n- Key risk: \"the risk of an abrupt reversal of financial market conditions\" that could \"represent a material downside risks in the U.S.\"\n- Transmission mechanism of concern:\n  - \"a sudden tightening of financial conditions could interact adversely with the high level of private, public, corporate, households, and sovereign debt and could create a feedback loop that could also weigh on real activity and job creation\"\n  - Such developments would have international \"spillover effects beyond the borders of this country\""
    },
    {
      "heading": "Debt and fiscal policy",
      "content": "- Public debt assessment: \"the U.S. public debt is on an unsustainable path\"\n- Fiscal adjustment needed to \"lower the fiscal deficit and to put public debt on a gradual downward path over the medium term\"\n- Recommended elements of a credible package:\n  - \"steps to address the expected increases in entitlement spending on health and on social security\"\n  - \"raising indirect taxation\"\n  - \"instituting, as we have said many times before, a federal carbon tax\"\n- On fiscal risks from proposed policy expansions: attention to trade-offs between addressing social needs and restoring fiscal sustainability; options noted include entitlement reform, revenue measures, and efficiency in healthcare spending."
    },
    {
      "heading": "Monetary policy",
      "content": "- Federal Reserve stance: earlier in the year the Fed \"was pausing its process of raising interest rates\" — IMF \"fully agree[s] with that approach\"\n- Guidance: \"it will be important for the Fed to continue to be exclusively data dependent and to continue to communicate well\""
    },
    {
      "heading": "Trade, tariffs, and spillovers",
      "content": "- Trade framework: IMF emphasizes the need for \"a more open, more stable, more transparent, more predictable, and rules based international trade system\"\n- Position on trade conflict: \"nobody wins a trade war and everybody suffers\"\n- Tariffs and modeling:\n  - Difficulties quantifying technology \"decoupling\" vs. tariffs; work on technology impacts is \"something we're looking at and working on\"\n  - Existing modeling and estimates referenced from the April 2019 WEO (Chapter 4 and related boxes)\n  - Example estimate cited: \"a 25 percent tariff across the board on Chinese goods\" reduces U.S. GDP \"by around a point three percent of the GDP over a longer term\" (and \"a little bit less in the shorter term\")\n- Specifics on recent tariff measures:\n  - Tariffs already enacted (e.g., on China, aluminum) were \"built into our forecasts\" while proposed tariffs (e.g., on Mexico) were not embedded until implemented\n  - Effects observed so far: \"a modest headwind to the U.S. economy particularly the tariffs they've been placed on China\" with larger sectoral and state effects in integrated sectors (e.g., automobiles, transportation, agriculture)\n  - On passthrough: \"We have not yet seen a large impact of the tariffs on consumer prices although we do see their effects on import prices\"; passthrough could increase with time or higher tariffs\n  - Hypothetical escalation: implementation of \"US$300 billion of products for Chinese imports\" was discussed as likely to be a negative/ambiguous impact; modeling for broad 25 percent tariffs provides a reference point"
    },
    {
      "heading": "Transmission to third countries and the hemisphere",
      "content": "- Trade dispute spillovers occur through multiple channels:\n  - Direct trade channels and trade diversion (which can be positive for some exporters, e.g., agricultural producers)\n  - Uncertainty effects that reduce investment and tighten market financing, producing broadly negative effects once market and uncertainty channels are accounted for\n- For Mexico: \"effects of tariffs on Mexico are certainly larger as a share of GDP from Mexico than they are for the United States\" with pronounced impacts in sectors with cross-border integration\n- For Argentina and other third countries: possible short-lived gains from trade diversion but net negative effects once uncertainty and market channels operate"
    },
    {
      "heading": "Recession risk and scenarios",
      "content": "- Baseline: \"we don't see recession as a likelihood in our baseline in the U.S.\"\n- Expected path: \"a gradual slowing of the economy to a point where the economy slows down a little bit below the potential growth rate\"\n- Principal near-term risk channel: heightened trade uncertainty → increased risk aversion → tightening of financial conditions → slowdown in activity\n- Higher-than-assumed financial market responses would amplify macro effects beyond baseline model estimates"
    },
    {
      "heading": "Structural reforms and long-term growth",
      "content": "- Areas identified to raise labor productivity and long-run growth:\n  - Investments in \"health and education\" and improving access to both\n  - Raising college retention rates and strengthening K through 12 science and technology education\n  - \"immigration reform\" — particularly skill-based immigration to boost productivity and labor supply\n  - Addressing \"the rise in corporate market power\" to preserve contestability, investment, and innovation (evidence cited from April WEO and other IMF work)\n  - Infrastructure investment to reduce commute times and improve living standards, with funding options including a \"federal gasoline tax\" or other revenue measures\n- Fiscal sustainability: placing the fiscal trajectory on sound footing will reduce risk premia and support long-term growth\n\nTranscript of Press Conference on the Conclusion of the 2019 Article IV Consultation with the United States (June 6, 2019).\n\n---\n\n\n References\n\n- Christine Lagarde\n- People's Republic of China and the IMF\n- Mexico and the IMF\n- United States and the IMF\n- IMF Policy Advice -- A Factsheet\n- Transcripts\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2019/06/07/tr060619-united-states-transcript-of-press-conference-conclusion-2019-article-iv-consultation"
    }
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    "Published: June 6, 2019",
    "The U.S. economy is described as approaching \"the longest expansion in recorded history.\"",
    "Growth projections:",
    "Labor market:",
    "Inflation: \"inflation pressures in the U.S. remains very subdued\"",
    "Noted adverse trends:",
    "Recommendations to promote inclusive and sustainable growth:",
    "Financial market conditions \"have improved markedly\" in the first months of the year, supporting near-term growth by reducing financing costs.",
    "Key risk: \"the risk of an abrupt reversal of financial market conditions\" that could \"represent a material downside risks in the U.S.\"",
    "Transmission mechanism of concern:",
    "Public debt assessment: \"the U.S. public debt is on an unsustainable path\"",
    "Fiscal adjustment needed to \"lower the fiscal deficit and to put public debt on a gradual downward path over the medium term\"",
    "Recommended elements of a credible package:",
    "On fiscal risks from proposed policy expansions: attention to trade-offs between addressing social needs and restoring fiscal sustainability; options noted include entitlement reform, revenue measures, and efficiency in healthcare spending.",
    "Federal Reserve stance: earlier in the year the Fed \"was pausing its process of raising interest rates\" — IMF \"fully agree[s] with that approach\"",
    "Guidance: \"it will be important for the Fed to continue to be exclusively data dependent and to continue to communicate well\"",
    "Trade framework: IMF emphasizes the need for \"a more open, more stable, more transparent, more predictable, and rules based international trade system\"",
    "Position on trade conflict: \"nobody wins a trade war and everybody suffers\"",
    "Tariffs and modeling:",
    "Specifics on recent tariff measures:",
    "Trade dispute spillovers occur through multiple channels:",
    "For Mexico: \"effects of tariffs on Mexico are certainly larger as a share of GDP from Mexico than they are for the United States\" with pronounced impacts in sectors with cross-border integration",
    "For Argentina and other third countries: possible short-lived gains from trade diversion but net negative effects once uncertainty and market channels operate",
    "Baseline: \"we don't see recession as a likelihood in our baseline in the U.S.\"",
    "Expected path: \"a gradual slowing of the economy to a point where the economy slows down a little bit below the potential growth rate\"",
    "Principal near-term risk channel: heightened trade uncertainty → increased risk aversion → tightening of financial conditions → slowdown in activity",
    "Higher-than-assumed financial market responses would amplify macro effects beyond baseline model estimates",
    "Areas identified to raise labor productivity and long-run growth:",
    "Fiscal sustainability: placing the fiscal trajectory on sound footing will reduce risk premia and support long-term growth",
    "[Christine Lagarde](https://www.imf.org/en/About/senior-officials/Bios/christine-lagarde)",
    "[People's Republic of China and the IMF](http://www.imf.org/external/country/CHN/index.htm)",
    "[Mexico and the IMF](http://www.imf.org/external/country/MEX/index.htm)",
    "[United States and the IMF](http://www.imf.org/external/country/USA/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Transcripts](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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