IMF: Limited Rate Cut Space for U.S. Despite Inflation Decline

According to Jin10, the International Monetary Fund (IMF) has indicated that although U.S. inflation is expected to fall to the Federal Reserve's 2% target by the first half of next year, policymakers have limited room for rate cuts this year. In its annual assessment of the U.S. economy, IMF staff predict only one opportunity for a rate cut by the end of 2026. The staff noted that there is limited scope for policy rate reductions in the coming year. More significant monetary easing would require a notable deterioration in the labor market outlook without increased inflation pressures. Recent rises in oil and commodity prices have led to upward inflation expectations. An IMF executive director stated separately that given the Fed's current neutral policy stance, there is limited room for rate cuts by 2026. This is especially true considering the rise in energy prices, the transmission effects of core inflation, and the upward risks in global commodity prices, which may further delay achieving the inflation target.