With inflation rising sharply, and the Federal Reserve raising interest rates, the United States is facing an increased risk of a downturn, IMF Managing Director Kristalina Georgieva said Friday.
But any temporary pain caused by a recession would be "a necessary price to pay" to defeat damaging inflation, she said.
While the IMF is confident the Fed's rate hikes will bring down inflation, "We are conscious that there is a narrowing path to avoiding a recession," she said in a statement. For 2023, growth is expected to slow to 1.7 percent, but "narrowly avoid" a recession, according to the annual review of the US economy, known as the Article IV consultation.
Georgieva met with US Treasury Secretary Janet Yellen and Fed Chair Jerome Powell and the officials "left no doubt as to their commitment to bring inflation back down." "Especially at a time when inflation is high and supply chains are strained... we can see clear benefits in rolling back the tariffs that were introduced over the last 5 years," Georgieva said in a statement.
The rapid US recovery, helped by low interest rates and hefty government aid, had domestic benefits, reducing poverty and creating more than 8.5 million jobs since the end of 2020, according to the IMF analysis.
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