IMF sees solid US growth but warns rising deficits and debt heighten vulnerabilities.
Summary:
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IMF completes US Article IV review
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2026 growth seen at 2.4%
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Employment growth to slow structurally
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Unemployment near 4% in 2026–27
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Core PCE at 2% by early 2027
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Deficits seen at 7–8% of GDP
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Debt projected at 140% of GDP by 2031
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Current account gap 3.5–4% of GDP
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Fed credibility “highly valuable asset”
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Warns of disorderly portfolio shifts
The International Monetary Fund called on the United States to rein in large fiscal deficits, while forecasting steady economic growth and a gradual return of inflation to target.
In its Article IV review, the IMF projected US growth of 2.4% in 2026, in line with its January World Economic Outlook, and said the unemployment rate should remain close to 4% through 2026–27. However, it warned that employment growth is likely to slow to less than half its pre-pandemic pace, reflecting weaker population growth.
Inflation is expected to ease only gradually, with core PCE reaching the Federal Reserve’s 2% target in early 2027. The Fund noted that tariff pass-through to consumer prices could be lower than assumed, potentially allowing more front-loaded disinflation and firmer activity. At the same time, ongoing trade uncertainty could weigh on growth.
The IMF underscored rising fiscal vulnerabilities, projecting US deficits in the 7–8% of GDP range in coming years — more than double levels targeted by Treasury Secretary Scott Bessent. Consolidated general government debt is forecast to climb to 140% of GDP by 2031.
Externally, the current account deficit is expected to remain large at 3.5–4% of GDP, supported by non-resident financial inflows and rising external borrowing. The Fund cautioned that an abrupt shift in global portfolio preferences could trigger disorderly external rebalancing.
IMF
It also stressed that the Federal Reserve’s policy credibility is a “highly valuable asset” that must be carefully guarded, including by preserving monetary policy independence.
