08.10.202523:16:58UTC+00IMF Warns Fed to Balance Rate Cuts with Inflation and Tariff Risks

IMF Managing Director Kristalina Georgieva mentioned to Reuters that while there is the possibility of the U.S. Federal Reserve reducing interest rates more this year, it needs to carefully weigh the potential for weaker economic growth against indicators suggesting that disinflation is decelerating. She observed that the U.S. economy has demonstrated resilience, achieving a growth rate of 3.8% in the second quarter, bolstered by strong consumer demand, despite a slowdown in hiring. Georgieva cautioned that the inflation outlook might become "a bit more concerning" if persistent inflation in the services sector—still approximately 1% above pre-pandemic figures—aligns with increased pass-through of tariff costs. Furthermore, she highlighted that consumers have not yet fully experienced the impact of former President Trump's tariff increases, as many companies have managed to pre-stock goods and absorb costs by thinning their profit margins. Currently, the trade-weighted tariff rate is about 17.5%, while the effective rate collected remains under 10%. However, she warned that this situation might not persist, especially as some companies see their profit buffers diminish, particularly in the lower-end consumer goods market.