IMF slightly downgrades US economic forecast for 2024

The IMF said Thursday it expects the US economy to grow a bit more slowly than previously forecast, while praising the way it has remained "robust, dynamic, and adaptable to changing global conditions."

The world's largest economy is now expected to grow by 2.6 percent this year, down 0.1 percentage point from the International Monetary Fund's previous forecast in April.

"The U.S. economy has proven itself to be robust, dynamic, and adaptable to changing global conditions," the IMF said in a statement accompanying its updated economic forecasts, adding that activity and employment "continue to exceed expectations."

"Nonetheless, the fiscal deficit is too large, creating a sustained upward trajectory for the public debt-GDP ratio," it added, while warning about the impact of the "ongoing expansion of trade restrictions."

The IMF said it expects the Federal Reserve to hit its inflation target by mid-2025, slightly ahead of the median forecast from the Fed's rate-setting committee.

The US central bank has responded to a post-pandemic inflationary surge in 2022 by hiking its key lending rate to its highest level in 23 years, and then holding it there.

While inflation has fallen sharply, it remains stuck slightly above the Fed's target, and policymakers have indicated their are happy to hold rates high until they see further signs of disinflation.

In its updated economic forecasts published Thursday, the IMF said "there are important upside risks to the outlook for inflation."

"The expected decline in shelter inflation may materialize more slowly, or reverse more quickly, than expected," it said.

"Also, even with the sizable expansion in labor supply, nominal wage growth remains relatively high which could forestall the expected softening of non-shelter services inflation," it added.