A top official for the International Monetary Fund (IMF) warned that the risk of a “hard landing” for the U.S. economy remains despite data showing inflation gradually subsiding.
Gita Gopinath, the first deputy managing director for the IMF, told CNBC in an interview on Wednesday that the IMF has raised its predictions for economic growth this year because of a surprisingly strong U.S. labor market and consumer spending.
Data from the Labor Department released Wednesday showed the rate of price increases slowing to 5 percent annually, down from 6 percent in February. Prices also rose by 0.1 percent on a monthly basis after an increase of 0.4 percent in February.
Gopinath said the most recent economic data shows signs of softening in the economy, creating the possibility that the country could avoid a recession, though she pointed to low growth figures.
“If you look at our growth numbers, we’re looking at very low growth numbers for the U.S., and so the risks of a hard landing remain,” she said.
The Federal Reserve has aggressively raised interest rates over the past year, most recently pushing them up 0.25 points to a baseline range of 4.75 to 5 percent, to try to get inflation under control.
Inflation has consistently dropped since the summer when it reached a 9.1 percent annual rate in June. Fed Chair Jerome Powell has indicated a willingness to raise rates as necessary to get inflation under control to the Fed’s target of 2 percent, but economic experts have expressed concerns that the rates could cause an economic downturn.
The Fed is trying to accomplish a “soft landing” in which inflation is brought down without harming the economy too significantly.
The economy has shown resilience in continuing to add jobs each month, adding 236,000 jobs in March.
Gopinath said the Fed’s continuing interest rate hikes could cause a change from positive to negative growth, but she added that it has done well at finding a balance between lowering prices and managing the economy more broadly.
“This is a very difficult time for central bankers,” she said. “I think, as of now the Fed, has been correct about keeping its eye on inflation and of course adjusting depending upon how the data comes in.”
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April 13, 2023 at 02:00AM
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IMF: Risk of hard landing for US economy persists - The Hill
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