WASHINGTON, May 26 (KUNA) -- US Secretary of the Treasury Janet Yellen met Friday with International Monetary Fund (IMF) Managing Director Kristalina Georgieva to discuss this year's Article IV consultation.
A Treasury statement said Yellen reiterated the importance of frank and thorough assessments of all IMF member economies through the annual surveillance process, especially as countries deal with the effects of Russia's war against Ukraine.
They discussed key economic priorities of the Biden Administration, the strong US response to recent stress in the banking sector, and the outlook for the US economy.
Secretary Yellen emphasized the transformative impact of the Inflation Reduction Act, which is the most consequential piece of climate legislation in US history. The Secretary also noted the resilience of the US economy in the face of global headwinds, as well as the progress "we've" made over the past year in bringing down inflation while maintaining a strong labor market.
As part of its longstanding support for transparency, the Treasury Department will publish all US Article IV documents on its website following the Executive Board's discussion in June, including the IMF's Concluding Statement and Staff Report and the US statement in response to the report.
On its part, an IMF statement described the preliminary findings of IMF staff at the end of an official staff visit (or 'mission'), in most cases to a member country. Missions are undertaken as part of regular (usually annual) consultations under Article IV of the IMF's Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored programs, or as part of other staff monitoring of economic developments.
The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF's Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.
The statement carried on saying that the US economy has proven resilient in the face of the significant tightening of both fiscal and monetary policy that took place in 2022. Consumer demand has held up particularly well, boosted initially by a drawdown of pent-up savings and, more recently, by solid growth in real disposable incomes. Prime age labor force participation has risen above its pre-pandemic peak, the unemployment rate for women and African Americans has fallen to historical lows, and real wages have been rising faster than inflation since mid-2022.
Growth of around 1.2 percent (on a q4/q4 basis) is expected for this year, modestly picking up momentum later in 2024. This slowing, but still-solid, growth is expected to be associated with unemployment rising slowly to close to 4آ½ percent by the end of 2024.
The Fund said the strength in demand and in labor market outcomes is a "double-edged sword, contributing to more persistent inflation." Goods inflation has leveled out and shelter price growth is expected to start moderating in the coming months.
However, past nominal wage increases are now feeding into non-shelter services. While core and headline PCE inflation are expected to continue falling during 2023, they will remain materially above the Fed's 2 percent target throughout 2023 and 2024.
The statement carried on saying that to bring inflation firmly back to target will require an extended period of tight monetary policy, with the federal funds rate remaining at 5آ¼-5آ½ percent until late in 2024. Model estimates suggest such a path would be sufficient to slow demand, restore balance to the labor market, and lower wage and price inflation. However, insofar as models are calibrated on past experiences, they offer only an imperfect guide to the current conjuncture. (end) rsr.hb