IMF says Federal Reserve is ’appropriately’ keeping close eye on data

On Thursday, the International Monetary Fund (IMF) stated that the US Federal Reserve is appropriately monitoring US economic data to inform its monetary policy decision-making, following the central bank's decision to leave interest rates unchanged. IMF spokesperson Julie Kozack affirmed the IMF's support for Federal Reserve Chair Kevin Warsh's emphasis on price stability, noting that headline inflation in the US remained above the 2% target.

Both the Federal Reserve and the European Central Bank, which also maintained unchanged interest rates in recent meetings, were operating in an environment characterized by high uncertainty, according to Kozack. The US Commerce Department reported that the US economy expanded at its fastest pace in a year during the third quarter, despite higher oil prices stemming from geopolitical tensions, and robust consumer spending and business investment in artificial intelligence.

This strong growth, coupled with other data indicating rising inflation and broader price increases in September, suggested that the Federal Reserve should consider raising interest rates in December, according to economists. The Federal Reserve decided to maintain its benchmark overnight interest rate within the 3.75% to 4.00% range while acknowledging persistent inflation, emphasizing the need for the central bank to remain data-dependent while acknowledging the economy's strength and inflationary risks.

Kozack stressed that the Federal Reserve's focus on price stability and any necessary actions to curb inflation over time remain paramount, highlighting strong economic growth driven by private consumption, investment, and productivity gains, though noting that these gains were not evenly distributed, particularly within the technology sector and associated with strong equity markets.