IMF sees 'buoyant' US economy, warns of risks from tariffs, rising debt

A "buoyant" US economy is poised to see accelerated growth and lower unemployment this year. But big federal budget debts "represent a growing stability risk," the International Monetary Fund said Wednesday.

The 191-country lending organisation's assessment of the world's biggest economy was mostly positive. The IMF saw US gross domestic product - the country's output of goods and services - growing 2.4 per cent in fourth-quarter 2026 from the last three months of 2025, up from 2.2 per cent growth the year before.

It sees US unemployment dropping from 4.5 per cent in late 2025 to 4.1 per cent in 2026 and inflation falling to the Federal Reserve's 2 per cent target by 2027. IMF managing director Kristalina Georgieva said the Fed, which cut its benchmark interest rate three times in 2025, could afford to push it down to around 3.4 per cent from 3.6 per cent currently. But it should hold off on deeper cuts barring a "material worsening'' in the American job market, she said.

 

The United States has been helped by strong productivity growth. But Georgieva said the US economy would have performed even better without President Donald Trump's big taxes on foreign imports. The fund's report warned that the president's protectionist trade policies "could represent a larger-than-expected drag on activity."  The IMF expressed concern about the federal government's debts, which it sees rising steadily from just under 100 per cent of US GDP last year to almost 110 per cent by 2031.