The head of the International Monetary Fund said that the US economy is definitely heading towards a soft landing thanks to the Federal Reserve's taming of inflation, despite some pain caused by higher interest rates.
Kristalina Georgieva, in an interview with Christiane Amanpour on CNN International, added on Tuesday: The Federal Reserve had the desired effect without pushing the economy into recession.
Slowing inflation and the labor market in the United States, after the steepest interest rate hike cycle in a generation, have raised hopes that the world's largest economy will avoid a deep recession, and cleared the way for the Fed to cut interest rates this year. Bloomberg Economics says borrowing cost cuts could begin in March.
In response to a question about the prospects for Donald Trump's election in 2024, and the possible return of his protectionist trade policies, Georgieva said that policymakers must help those affected by globalization, otherwise they risk stirring up resentment and isolationism. She continued: We will see in the United States, in Europe, and everywhere, resistance to what makes us all richer and more secure, as this is an integrated global economy.
As the strategic rivalry between the United States and China escalates, the International Monetary Fund has warned of the economic damage from fragmentation, which it said could risk wasting 7% of global GDP. This situation threatens to impede access to critical minerals needed for green technologies in the future, Georgieva said.
She added: If they end up being inaccessible, this could significantly impact future competitiveness in a rapidly transforming global economy.
