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IMF says Fed taking appropriate action on rates given high US uncertainty
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IMF says Fed taking appropriate action on rates given high US uncertainty
Dec 19, 2024 10:06 AM

WASHINGTON (Reuters) - The International Monetary Fund views Wednesday's Federal Reserve interest rate cut and adoption of a more cautious outlook as appropriate given high U.S. economic uncertainty, IMF spokesperson Julie Kozack said on Thursday.

"Data from the last few months shows that the labor market continues to cool at the same time that inflation has been somewhat higher than expected, but still trending down toward the target," Kozack told a news briefing. "So with this background, we see the Fed's action as appropriate."

Kozack said the U.S. disinflation process has proven less costly than many had feared in terms of jobs, the IMF expects core PCE inflation, the Fed's preferred measure, to end 2024 at just under 3% as it declines towards the Fed's 2% target.

Earlier on Thursday, the Bank of Japan kept interest rates unchanged but offered few clues on how soon it could push up borrowing costs as it waits for U.S. President-elect Trump's economic and tariff plans.

Kozack said that the IMF also views the BOJ's actions as appropriate.

"We also recommend that they continue a data-dependent monetary policy as they seek to both policy normalization and ensuring that inflation directly returns to target," Kozack said of the BOJ.

Asked about Trump's plans for a U.S. strategic bitcoin reserve, Kozack declined to comment, saying the IMF would fully assess Trump's policies as they are implemented after he takes office in January.

The IMF's $2.4 billion loan deal this week with El Salvador requires the country to scale back its official bitcoin activities. Kozack said the Fund sees both opportunities and risks to crypto assets, including risks to financial stability and integrity and consumer protection and countries should have policy frameworks to address such risks.

But she said the IMF recognizes that financial institutions are adopting underlying crypto asset technology for payment systems, security and back office operations.

"And it's also important to recognize that investor appetite for crypto assets has been very strong, reflecting the assessment by some that crypto assets can generate diversification benefits in asset allocation," she said.

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