{ "title": "United States of America: Staff Concluding Statement of the 2024 Article IV Mission", "publication": "IMF News, June 27, 2024", "sourceUrl": "https://www.imf.org/en/news/articles/2024/06/27/cs62724-united-states-concluding-statement-of-the-2024-article-iv", "canonical": "https://www.imf.org/en/news/articles/2024/06/27/cs62724-united-states-concluding-statement-of-the-2024-article-iv", "overlayPath": "/en/news/articles/2024/06/27/cs62724-united-states-concluding-statement-of-the-2024-article-iv/index.md", "summary": "The U.S. economy has proven itself to be robust, dynamic, and adaptable to changing global conditions. Activity and employment continue to exceed expectations (notably, relative to those at the time of the 2023 Article IV consultation) and the disinflation process has been considerably less costly than many had feared. Nonetheless, the fiscal deficit is too large, creating a sustained upward trajectory for the public debt-GDP ratio. The ongoing expansion of trade restrictions and insufficient progress in addressing the vulnerabilities highlighted by the 2023 bank failures both pose important downside risks.", "publishDate": "2024-06-27", "sections": [ { "heading": "Key takeaways", "content": "- The U.S. economy is \"robust, dynamic, and adaptable to changing global conditions.\"\n- Activity and employment continue to exceed expectations relative to the 2023 Article IV consultation.\n- Disinflation has been \"considerably less costly than many had feared,\" but the fiscal deficit remains \"too large,\" driving a sustained upward trajectory for the public debt-GDP ratio.\n- Ongoing expansion of trade restrictions and insufficient progress in addressing vulnerabilities from the 2023 bank failures pose important downside risks." }, { "heading": "A Dynamic Economy — findings", "content": "- Hysteresis effects from the pandemic did not materialize; activity and employment exceed pre-pandemic expectations.\n- Real incomes, after being diminished by the unexpected rise in inflation in 2022, have risen above pre-pandemic levels.\n- Job growth: \"16 million new jobs created since end-2020.\"\n- Income and wealth gains have been uneven; poverty remains high following expiration of pandemic-era support.\n- Outlook supported by:\n - A significant rise in household wealth; homeowners benefited from an \"almost 50 percent increase in the average house price since end-2019.\"\n - Household and corporate debt service burden insulated from market interest rate increases: \"net interest payments by nonfinancial corporates fell\" and \"net interest outlays by households saw only a modest increase.\"\n - A material improvement in the terms of trade driven by net exports of natural gas, crude oil, and petroleum products.\n - Large and ongoing supply gains from migrant inflows (expanding the workforce by \"almost 3 percent over the past three years\"), increased participation by native-born workers (particularly female, black and Hispanic workers), and rising labor productivity.\n- Near-term distribution of activity risks assessed as \"broadly balanced\":\n - Upside: consumption and investment could exceed expectations due to a healthy labor market, rising real incomes, and wealth gains; persistent supply-side gains from higher productivity and foreign labor inflows.\n - Downside: complex global geopolitical environment or slower disinflation leading to a higher path for interest rates." }, { "heading": "Progress in Disinflation — findings and risks", "content": "- PCE inflation peaked at \"7.1 percent in mid-2022.\"\n- The Federal Reserve raised the policy rate by \"525bps.\"\n- PCE inflation was \"2.7 percent in April\" and is expected to return to \"2 percent by mid-2025.\"\n- Upside risks to inflation:\n - Shelter inflation may decline more slowly or reverse.\n - Nominal wage growth remains relatively high, which could slow softening of non-shelter services inflation.\n - Escalation of geopolitical tensions (e.g., Middle East conflict or war in Ukraine) could raise energy costs and pass through to wages and core inflation." }, { "heading": "Monetary Policy — guidance and considerations", "content": "- Recommendation: The Federal Reserve should \"wait to reduce its policy rate until at least late 2024.\"\n- Rationale:\n - The economy is \"humming along\" and the current monetary stance has not imposed high costs in terms of growth or employment.\n - There is significant room for maneuver within the Fed’s mandate of price stability and maximum employment.\n - Given upside inflation risks, lower the policy rate only after clearer evidence of sustained return to the FOMC’s \"2 percent goal.\"\n - If incoming inflation data runs hot, consider removing the loosening bias in Fed communications and potentially further raising the federal funds rate.\n- Communications: Continue to clearly communicate the FOMC’s interpretation of incoming data and adjust forward guidance to ensure smooth absorption of stance shifts.\n- Balance sheet: The decision to reduce the pace of run-off of the Fed’s holdings of Treasuries will provide time to judge the appropriate long-term size of the Fed’s balance sheet; decisions on stopping the shrinking should avoid inducing volatility in short-term funding markets." }, { "heading": "Fiscal Policy — diagnosis and recommendations", "content": "- Diagnosis:\n - \"Pressing need to reverse the ongoing increase in public debt-GDP ratio.\"\n - Under current policies, \"general government debt is expected to rise steadily and exceed 140 percent of GDP by 2032.\"\n - General government deficit expected to remain \"around 2½ percent of GDP above the levels forecast at the time of the 2019 Article IV consultation.\"\n - High deficits and debt create risks: higher fiscal financing costs and risks to smooth rollover of maturing obligations.\n- Required adjustment:\n - To put debt-GDP on a clear downward trajectory, a frontloaded fiscal adjustment is needed to shift to a \"general government primary surplus of around 1 percent of GDP (an adjustment of around 4 percent of GDP relative to the current baseline).\"\n- Policy options and priorities:\n - Options include raising indirect taxes, progressively increasing income taxes (including for those earning less than \"US$400,000 per year\"), eliminating a range of tax expenditures, and reforming entitlement programs.\n - Policies must go beyond efficiencies in discretionary, non-defense federal spending.\n - Some fiscal savings should be deployed to increase spending on poverty alleviation:\n - Reinstating a more generous, refundable Child Tax Credit targeted to lower income households.\n - Raising the income threshold for eligibility for the Earned Income Tax Credit for workers without children.\n- Fiscal institutions:\n - Address shortcomings that lead to political stand-offs over the debt limit and funding lapses.\n - Institutional changes suggested:\n - Ensure that once appropriations are approved, the corresponding space is automatically added to the debt ceiling.\n - Where funding lapses occur, automatically fund the federal government at some fraction of previous year’s funding until a full-year appropriations bill can be signed into law." }, { "heading": "Overall macro assessment", "content": "- \"The U.S. economy has largely returned to balance.\"\n- Labor market imbalances mostly resolved; economy appearing to operate \"slightly above maximum employment.\"\n- By mid-2025, inflation expected to return to the FOMC’s \"2 percent goal\" allowing policy rate to return to a neutral setting.\n- External position assessed to be \"broadly in line with the level implied by medium term fundamentals and desirable policies.\"\n- Persistent concern: fiscal deficit \"much too large\" and public debt \"well above prudent levels.\"" }, { "heading": "Risks — Financial system", "content": "- Financial stability risks diminished since 2023 Article IV consultation and some critical reforms are being implemented (e.g., measures to strengthen Treasury market functioning and insulate money market funds).\n- Remaining gaps: insufficient mitigation of banking system vulnerabilities revealed in 2023, including failings in bank supervision, the large share of uninsured deposits, and risks from 2018 regulatory \"tailoring.\"\n- Recommendations:\n - Fully implement the final components of the Basel III agreement.\n - Apply similar regulatory requirements to all banks with \"US$100 billion or more in assets\" (including supervisory stress tests).\n - Further strengthen supervisory oversight and practices.\n - Re-examine the coverage of deposit insurance.\n - Recalibrate bank liquidity requirements and liquidity stress tests to account for fast-moving deposit outflows and potential losses when long-duration assets are liquidated.\n - Increase resilience of nonbank mortgage companies, given their role in servicing a sizable share of U.S. mortgages." }, { "heading": "Risks — Trade", "content": "- Ongoing intensification of trade restrictions and increased use of preferences between domestic and foreign commercial interests are growing downside risks.\n- Policy recommendations:\n - Actively engage with major trading partners to address core issues: unfair trade practices, supply chain fragilities, and national security concerns.\n - Avoid tariffs, nontariff barriers, and domestic content provisions, which distort trade and investment, risk fragmenting global supply chains, and spur retaliatory actions.\n - Unwind obstacles to free trade and bolster competitiveness through investments in worker training, apprenticeships, and infrastructure.\n - Engage fully with efforts to strengthen the WTO, including restoration of a well-functioning dispute settlement system by \"end-2024,\" find common ground on tariffs, farm and industrial subsidies, and services trade, and conclude new WTO-based market-opening agreements.\n - Confine industrial policies to specific objectives where market failures exist; minimize trade and investment distortions, be consistent with international obligations, and avoid discriminating between domestic and overseas producers." }, { "heading": "Selected economic indicators and projections (as presented)", "content": "- Real GDP (annual growth):\n - 2022: 1.9\n - 2023: 2.5\n - 2024: 2.6\n - 2025: 2.0\n - 2026: 2.1\n - 2027: (not provided in table for annual growth)\n- Real GDP (q4/q4):\n - 2022: 0.7\n - 2023: 3.1\n - 2024: 1.8\n- Output gap (% of potential GDP):\n - 2022: 0.4\n - 2023: 0.6\n - 2024: 0.2\n - 2025: -0.2\n - 2026: -0.1\n- Unemployment rate (q4 average):\n - 2022: 3.6\n - 2023: 3.7\n - 2024: 4.2\n - 2025: 4.3\n - 2026: 4.0\n - 2027: 3.9\n- Current account balance (% of GDP):\n - 2022: -3.8\n - 2023: -3.0\n - 2024: -2.9\n - 2025: -2.8\n - 2026: -2.5\n - 2027: -2.2\n - 2028: -1.9\n - 2029: -1.6\n- Federal funds rate (end of period):\n - 2022: 4.4\n - 2023: 5.4\n - 2024: 5.1\n - 2025: 4.1\n - 2026: 2.9\n- Ten-year government bond rate (q4 avg.):\n - 2022: 3.8\n - 2023: 3.5\n - 2024: 3.3\n - 2025: 3.2\n- PCE inflation (q4/q4):\n - 2022: 5.9\n - 2023: 2.8\n - 2024: 2.4\n- Federal government fiscal balance (% of GDP):\n - 2022: -5.4\n - 2023: -6.3\n - 2024: -6.8\n - 2025: -6.6\n - 2026: -6.1\n - 2027: -5.6\n - 2028: -5.3\n- Federal government debt held by the public (% of GDP):\n - 2022: 95.8\n - 2023: 97.3\n - 2024: 99.2\n - 2025: 102.1\n - 2026: 104.7\n - 2027: 106.3\n - 2028: 108.1\n - 2029: 109.5\n- General government fiscal balance (% of GDP):\n - 2022: -4.1\n - 2023: -7.6\n - 2024: -7.8\n - 2025: -7.2\n - 2026: -6.7\n - 2027: -6.5\n- General government gross debt (% of GDP):\n - 2022: 119.8\n - 2023: 120.7\n - 2024: 123.2\n - 2025: 126.7\n - 2026: 129.6\n - 2027: 131.8\n - 2028: 134.0\n - 2029: 135.9\n\nIMF staff concluding statement of the 2024 Article IV mission for the United States of America (June 27, 2024).\n\n---\n\n\n References\n\n- United States and the IMF\n- IMF Policy Advice -- A Factsheet\n- Mission Concluding Statements\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2024/06/27/cs62724-united-states-concluding-statement-of-the-2024-article-iv" } ], "bullets": [ "[Markdown version](/en/news/articles/2024/06/27/cs62724-united-states-concluding-statement-of-the-2024-article-iv/index.md)", "[Structured JSON version](/en/news/articles/2024/06/27/cs62724-united-states-concluding-statement-of-the-2024-article-iv/index.json)", "[Bundle manifest](/en/news/articles/2024/06/27/cs62724-united-states-concluding-statement-of-the-2024-article-iv/bundle-manifest.json)", "Published: June 27, 2024", "The U.S. economy is \"robust, dynamic, and adaptable to changing global conditions.\"", "Activity and employment continue to exceed expectations relative to the 2023 Article IV consultation.", "Disinflation has been \"considerably less costly than many had feared,\" but the fiscal deficit remains \"too large,\" driving a sustained upward trajectory for the public debt-GDP ratio.", "Ongoing expansion of trade restrictions and insufficient progress in addressing vulnerabilities from the 2023 bank failures pose important downside risks.", "Hysteresis effects from the pandemic did not materialize; activity and employment exceed pre-pandemic expectations.", "Real incomes, after being diminished by the unexpected rise in inflation in 2022, have risen above pre-pandemic levels.", "Job growth: \"16 million new jobs created since end-2020.\"", "Income and wealth gains have been uneven; poverty remains high following expiration of pandemic-era support.", "Outlook supported by:", "Near-term distribution of activity risks assessed as \"broadly balanced\":", "PCE inflation peaked at \"7.1 percent in mid-2022.\"", "The Federal Reserve raised the policy rate by \"525bps.\"", "PCE inflation was \"2.7 percent in April\" and is expected to return to \"2 percent by mid-2025.\"", "Upside risks to inflation:", "Recommendation: The Federal Reserve should \"wait to reduce its policy rate until at least late 2024.\"", "Rationale:", "Communications: Continue to clearly communicate the FOMC’s interpretation of incoming data and adjust forward guidance to ensure smooth absorption of stance shifts.", "Balance sheet: The decision to reduce the pace of run-off of the Fed’s holdings of Treasuries will provide time to judge the appropriate long-term size of the Fed’s balance sheet; decisions on stopping the shrinking should avoid inducing volatility in short-term funding markets.", "Diagnosis:", "Required adjustment:", "Policy options and priorities:", "Fiscal institutions:", "\"The U.S. economy has largely returned to balance.\"", "Labor market imbalances mostly resolved; economy appearing to operate \"slightly above maximum employment.\"", "By mid-2025, inflation expected to return to the FOMC’s \"2 percent goal\" allowing policy rate to return to a neutral setting.", "External position assessed to be \"broadly in line with the level implied by medium term fundamentals and desirable policies.\"", "Persistent concern: fiscal deficit \"much too large\" and public debt \"well above prudent levels.\"", "Financial stability risks diminished since 2023 Article IV consultation and some critical reforms are being implemented (e.g., measures to strengthen Treasury market functioning and insulate money market funds).", "Remaining gaps: insufficient mitigation of banking system vulnerabilities revealed in 2023, including failings in bank supervision, the large share of uninsured deposits, and risks from 2018 regulatory \"tailoring.\"", "Recommendations:", "Ongoing intensification of trade restrictions and increased use of preferences between domestic and foreign commercial interests are growing downside risks.", "Policy recommendations:", "Real GDP (annual growth):", "Real GDP (q4/q4):", "Output gap (% of potential GDP):", "Unemployment rate (q4 average):", "Current account balance (% of GDP):", "Federal funds rate (end of period):", "Ten-year government bond rate (q4 avg.):", "PCE inflation (q4/q4):", "Federal government fiscal balance (% of GDP):", "Federal government debt held by the public (% of GDP):", "General government fiscal balance (% of GDP):", "General government gross debt (% of GDP):", "[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)", "[Mission Concluding Statements](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)" ], "alternates": { "markdown": "/en/news/articles/2024/06/27/cs62724-united-states-concluding-statement-of-the-2024-article-iv/index.md", "json": "/en/news/articles/2024/06/27/cs62724-united-states-concluding-statement-of-the-2024-article-iv/index.json", "bundleManifest": "/en/news/articles/2024/06/27/cs62724-united-states-concluding-statement-of-the-2024-article-iv/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T03:08:41.850Z" }