US Economy Faces More Difficulties in Calibrating Inflation to Avoid Recession - IMF

WASHINGTON (Pakistan Point News / Sputnik - 13th July, 2022) The International Monetary Fund (IMF) board of Directors said on Tuesday that the US economy faces additional difficulties as the authorities try to calibrate the response to runaway inflation and avoid a recession.

"The directors recognized that calibrating the response to inflation comes with high stakes and that misjudging the policy mix - in either direction - will result in sizable costs at home and negative spillovers to the global economy," the IMF said in a statement. "They concurred that avoiding a recession in the United States is becoming increasingly challenging and that the Russian invasion of Ukraine, the lingering COVID-19 pandemic and supply side constraints create additional challenges."

The IMF issued the statement upon the conclusion of the so-called Article IV consultations with the United States.

The IMF praised the resilience of the US financial system and the Federal Reserve efforts to maintain the smooth functioning of the financial markets, the statement read.

"In this context, the directors encouraged the authorities to implement the remaining FSAP (Financial Sector Assessment Program) recommendations to further strengthen the financial system," the statement said.

The IMF recommended that the US government roll back its trade restrictions and tariff increases it had introduced over the past five years as well as to work actively with trading partners to strengthen the rules-based multilateral trading system centered around the World Trade Organization, the statement added.

The IMF warned that despite a quick recovery from the coronavirus pandemic and the relatively positive effects of the policy stimulus, the US economy continues to face significant inflation challenges caused by rising energy prices and ongoing global supply disruptions.