United States: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the United States

UNITEDSTATES IMFCountryReportNo.24/232 July2024 2024ARTICLEIVCONSULTATION—PRESSRELEASE;STAFFREPORT;ANDSTATEMENTBYTHEEXECUTIVEDIRECTORFORTHEUNITEDSTATES UnderArticleIVoftheIMF’sArticlesofAgreement,theIMFholdsbilateraldiscussionswithmembers,usuallyeveryyear.Inthecontextofthe2024ArticleIVconsultationwiththeUnitedStates,thefollowingdocumentshavebeenreleasedandareincludedinthispackage: APressReleasesummarizingtheviewsoftheExecutiveBoardasexpressedduringitsJuly17,2024,considerationofthestaffreportthatconcludedtheArticleIVconsultationwiththeUnitedStates. TheStaffReportpreparedbyastaffteamoftheIMFfortheExecutiveBoard’sconsiderationonJuly17,2024,followingdiscussionsthatendedonJune13,2024,withtheofficialsoftheUnitedStatesoneconomicdevelopmentsandpolicies.Basedoninformationavailableatthetimeofthesediscussions,thestaffreportwascompletedonJuly1,2024. AnInformationalAnnexpreparedbytheIMFstaff. AStatementbytheExecutiveDirectorfortheUnitedStates. TheIMF’stransparencypolicyallowsforthedeletionofmarket-sensitiveinformationandprematuredisclosureoftheauthorities’policyintentionsinpublishedstaffreportsandotherdocuments. Copiesofthisreportareavailabletothepublicfrom InternationalMonetaryFundPublicationServicesPOBox92780Washington,D.C.20090Telephone:(202)623-7430Fax:(202)623-7201 E-mail:publications@imf.orgWeb:http://www.imf.org InternationalMonetaryFundWashington,D.C. ©2024InternationalMonetaryFund PR24/281 IMFExecutiveBoardConcludes2024ArticleIVConsultationwiththeUnitedStates FORIMMEDIATERELEASE Washington,DC–July17,2024:TheExecutiveBoardoftheInternationalMonetaryFund(IMF)concludedtheArticleIVconsultation1withtheUnitedStates. TheU.S.economyhasturnedinastrongperformanceoverthepastfewyears.Hysteresiseffectsfromthepandemicdidnotmaterializeandbothactivityandemploymentnowexceedpre-pandemicexpectations.Realincomeswerediminishedbytheunexpectedriseininflationin2022buthavenowrisenabovepre-pandemiclevels.Jobgrowthhasbeenparticularlyfastwith16millionnewjobscreatedsinceend-2020.However,incomeandwealthgainshavebeenunevenacrosstheincomedistributionandpovertyremainshigh,particularlyfollowingtheexpirationofpandemic-erasupport. Theongoingdisinflationhastakenarelativelylighttollontheeconomy.TheFederalReserverespondedtorecord-highinflationbyraisingthepolicyrateby525bpswhichbolsteredpolicycredibility,providedananchorforwagesandprices,andhelpedguideinflationbacktowardtheFOMC’s2percentgoal.Wealthgainsandlimitedrefinancingneedshavebolsteredhouseholdandcorporatebalancesheetsagainstthecontractionaryimpactofhigherinterestrates.Monetarypolicytighteningwasalsosupportedbyimportantsupply-sidegains,includinganexpansionoflaborsupplyfromimmigrantinflows.PCEinflationwas2.7percentinApril(downfromapeakof7.1percentin2022)andisexpectedtoreturnto2percentbymid-2025. Thegeneralgovernmentfiscaldeficitanddebt,asashareofGDP,arebothprojectedtoremainwellabovepre-pandemicforecastsoverthemedium-term.Specifically,undercurrentpolicies,thegeneralgovernmentdebtisexpectedtorisesteadilyandexceed140percentofGDPby2032.Similarly,thegeneralgovernmentdeficitisexpectedtoremainaround2½ percentofGDPabovethelevelsforecastatthetimeofthe2019ArticleIVconsultation. SeveralstepshavebeentakentostrengthenthefunctioningoftheTreasurymarketandtobetterinsulatemoneymarketfundsfromliquidityshortfalls.ThepaceofshrinkingoftheFederalReserve’sbalancesheethasbeguntotaper.However,concreteactionshavebeenlackinginmitigatingthebankingsystemvulnerabilitiesthatcametolightin2023. ExecutiveBoardAssessment2 ExecutiveDirectorswelcomedtheremarkableperformanceoftheU.S.economyoverthepastfewyearsandnotedthattheongoingdisinflationprocess,aidedbyhigherproductivitygrowthandexpandedlaborsupply,includingthroughimmigration,hastakenarelativelylighttolloneconomicactivity.Whiletheoutlookremainspositive,Directorsemphasizedthatupsiderisks 1UnderArticleIVoftheIMF'sArticlesofAgreement,theIMFholdsbilateraldiscussionswithmembers,usuallyeveryyear.Astaffteamvisitsthecountry,collectseconomicandfinancialinformation,anddiscusseswithofficialsthecountry'seconomicdevelopmentsandpolicies.Onreturntoheadquarters,thestaffpreparesareport,whichformsthebasisfordiscussionbytheExecutiveBoard. 2Attheconclusionofthediscussion,theManagingDirector,asChairmanoftheBoard,summarizestheviewsofExecutiveDirectors, andthissummaryistransmittedtothecountry'sauthorities.Anexplanationofanyqualifiersusedinsummingsupcanbefoundhere:http://www.IMF.org/external/np/sec/misc/qualifiers.htm. 2 toinflationneedtobemonitoredanddeterminedactionswillbenecessarytoaddressfiscalimbalances,financialvulnerabilities,aswellastheincreasedinequalityandpoverty,whichhasrisenbacktopre-pandemiclevels. Directorscommendedtheauthoritiesfortheircommitmenttopricestabilityandsuccessfuldisinflation.Nevertheless,givensalientupsideriskstoinflationandstrongperformanceoftheeconomy,theynotedthattheFederalReserveshouldnotreduceitspolicyrateuntilthereisclearerevidencethatinflationissustainablyreturningtoits2percenttarget.Clearcommunication,includingforwardguidance,willhelpguidemarketexpectationsin