IMF Chief Economist: US Interest Rate Cut is Correct

Gita Gopinath, the Chief Economist of the International Monetary Fund (IMF), stated that the Federal Reserve's upcoming interest rate cut plan is "consistent" with IMF's recommendations. "The message sent out by Fed Chairman Powell today is very consistent with our stance," Gopinath said during a break at the Jackson Hole meeting. "Inflation has been improving and there are signs of cooling in the labor market. If the labor market no longer fuels inflationary pressure, you might be able to ease off slightly as overall demand cools down, allowing policy rates to return closer to neutral levels." Gopinath pointed out that America should not complacently believe that inflation has disappeared; she noted that service industry prices are still rising and the Fed must adjust its pace and magnitude of rate cuts based on forthcoming economic data. "There are still some upward risks for inflation," said Gopinath. Despite strong U.S economic growth, it appears that job markets are also cooling down; she does not think a recession is imminent but believes chances for a soft landing have increased - this remains IMF's main forecast.