IMF sees Fed to begin interest rate cuts as inflation falls

By Ovunc Kutlu

ISTANBUL (AA) - The International Monetary Fund (IMF) expects the US Federal Reserve to begin interest rate cuts next week as inflation is falling in the world's biggest economy.

Spokesperson Julie Kozack told a press briefing Thursday that inflation in the US has declined in response to the Fed's actions, and the IMF sees inflation on a path to the Fed's 2% target.

"The Fed's efforts were aided by important supply side gains and strong productivity growth. We expect course PCE inflation to end this year around 2.5 percent and be back to target by mid 2025," she said." There is less upside risk to this path than we saw earlier this year."

"With this recent data, it shows that the balance of risks has clearly shifted with labor markets cooling and upside risks to inflation, as I just noted, less pronounced. And that means that we see the imminent start of a loosening cycle as telegraphed by the Fed as appropriate," she added.

Kozack said the performance of American economy has been remarkably strong over the past few years, and the disinflation process has proven less costly than most had feared.

"The U.S. is the only G-20 economy whose GDP level now exceeds the pre-pandemic trend. And this is not only good for the United States, but also good for the global economy," she added.