The Federal Reserve should be able to start cutting interest rates by the end of 2024, according to Kristalina Georgieva, managing director of the International Monetary Fund.
“We stand by our forecast that by the end of the year the Fed will be able to take steps to lower interest rates,” Georgieva said on “Squawk on the Street” CNBC. “But again, don’t rush until the data tells you you can do it.”
Georgieva’s comments come after recent inflation data – which reflects price growth well above the 2% target – reinforced concerns that the central bank would not start cutting rates as soon as some previously hoped for it. Fed funds futures price data suggests the first rate cut could come in September, according to the CME FedWatch tool.
These fears have contributed to the recent decline in the US stock market, the benchmark S&P500 down almost 2% since the beginning of April.
Data on Thursday showed that wholesale prices rose 0.2% in March, slightly below estimates from economists surveyed by Dow Jones. That came a day after a report said consumer prices rose more than economists expected and marked an acceleration in inflation.
Georgieva said the Fed should continue to monitor economic data, which will indicate when it is appropriate to start reducing the cost of borrowing.
People should be optimistic about America’s future because the country isn’t feeling as much upward pressure on labor costs as other places, the former CEO said. World Bank. And the U.S. government can play a relatively larger role in preventing the economy from overheating, Georgieva said, providing another reason to be optimistic about the country’s financial health.
Georgieva nevertheless warned that keeping interest rates high for longer than expected could create risks for the financial stability of the rest of the world. At the same time, she said central banks around the world would be less likely to follow the direction of the U.S. Fed as conditions diverge.
“Inflation is falling,” Georgieva said. “But we’re not yet where we want to be.”
cnbc
