Fed Takes Appropriate Rate Actions Given High Uncertainty in the United States, IMF Says

The International Monetary Fund considers Wednesday’s interest rate cut by the Federal Reserve and adoption of a more cautious outlook to be appropriate given the high economic uncertainty in the United States, spokesperson Julie Kozack said Thursday. of the IMF.

“Data from the past few months show that the labor market continues to cool at the same time as inflation has been a little higher than expected, but still trending toward the target,” Ms. Kozack said during a press briefing. “In this context, we consider the Fed’s action to be appropriate.

According to Mr. Kozack, the process of disinflation in the United States has proven less costly than many feared in terms of jobs. The IMF expects core PCE inflation, the Fed’s preferred measure, to end 2024 at just under 3%, as it approaches the Fed’s 2% target. Fed.

Earlier on Thursday, the Bank of Japan kept interest rates unchanged, but offered few clues on how soon it might raise borrowing costs, pending economic plans. and tariffs of US President-elect Trump.

Kozack said the IMF also views the BOJ’s actions as appropriate.

“We also recommend that they pursue a data-driven monetary policy as they seek to both normalize their policy and ensure that inflation returns directly to target,” Kozack said of the BOJ.

Asked about Mr. Trump’s plans to create a strategic bitcoin reserve in the United States, Mr. Kozack declined to comment, saying the IMF would fully evaluate Mr. Trump’s policies as they progress. extent of their implementation after taking office in January.

The IMF’s $2.4 billion loan deal with El Salvador this week requires the country to scale back its official bitcoin-related activities. Mr Kozack said the Fund saw both opportunities and risks in cryptoassets, including risks to financial stability and integrity and consumer protection, and that countries should have policy frameworks to address these risks.

But she said the IMF recognizes that financial institutions are adopting the underlying technology of cryptoassets for payment systems, security and back-office operations.

“And it is also important to recognize that investor appetite for cryptoassets has been very strong, reflecting the assessment by some that cryptoassets can generate diversification benefits in asset allocation,” she declared.

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