Global economy faces tough year in 2023, warns IMF's Georgieva

Global economy faces tough year in 2023, warns IMF’s Georgieva

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US economy ‘most resilient’

Meanwhile, Georgieva said, the US economy is standing apart and may avoid the outright contraction that is likely to affect a third of the world’s economies.

“America is the most resilient,” he said, and it “can survive a recession. We see the labor market remains very strong.”

But that fact in itself presents a risk because it could hinder the progress the Fed needs to bring US inflation back to its target level from the highest level in four decades it touched last year. Inflation has shown signs of passing its peak as 2022 ends, but by the Fed’s preferred measure, it remains nearly three times its 2% target.

“This … is a mixed blessing because if the labor market is too strong, the Fed may have to keep interest rates tighter longer to bring down inflation,” Georgieva said.

Last year, in the most aggressive policy move since the early 1980s, the Fed raised its benchmark policy rate in March from near zero to 4.25% to 4.50%, and Fed officials estimated last month that it would raise that rate by another 5 percentage points. will violate In 2023, a level not seen since 2007.

Indeed, the US job market will be a central focus for Fed officials, who want to see labor demand ease to help ease price pressures. The first week of the new year brings a slew of key data on the jobs front, including Friday’s monthly non-farm payrolls report that is expected to show the US economy added 200,000 more jobs in December and the unemployment rate. remained at 3.7%. lowest since the 1960s.

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