Khaberni - Kristalina Georgieva, the Managing Director of the International Monetary Fund, stated that the Federal Reserve (the US central bank) might cut interest rates again this year, but it will have to carefully balance the declining growth prospects against signs that the slowdown in inflation has stalled.
Georgieva told Reuters that the US economy has proven its strength and exceeded most expectations by growing at a rate of 3.8 percent in the second quarter, and that domestic demand remains strong despite indicators showing that employment is not as robust.
Georgieva added in an interview conducted with her on Wednesday, "It's not a completely clear picture... Therefore, in this environment, considering the halt in inflation slowdown and that the economy might also be somewhat weak, it is extremely important for the Federal Reserve to do the right thing."
The US central bank had reduced interest rates by a quarter percentage point at its meeting in September, a step described by the bank's president Jerome Powell and others as a means to keep policy tight enough to curb the economy and impose downward pressure on inflation, while providing a more flexible policy that could help insure against rapid weakening of the labor market.
She said that consumers have not yet felt the full impact of US President Donald Trump imposing higher tariffs because companies had increased their inventories before the hike, indicating that some companies with large profit margins bear the cost.
She added that Trump’s increase of tariffs comes after decades of very low tariffs in the United States and moves made by other countries about a decade ago to lower their tariffs.
Trump’s change in that equation has turned the global economy into a truly multipolar one, as many countries are now exploring opportunities for cooperation with regional partners or signing multilateral agreements with other regions.
She said that this new world is likely to continue as is.
She continued, "I don’t think we will go back to the world we had, if you want to describe it that way, before the COVID-19 pandemic before all these shocks hit us... I see tremendous potential in places like the Association of Southeast Asian Nations (ASEAN), the Gulf, and some regions in Africa where there are strong economies, to move in the direction of more regional integration in trade and financial services, and I think that is a good thing."
