IMF, Report: United States of America, Staff Concluding Statement of the 2023 Article IV Mission

“Given the important uncertainties facing the U.S. Economy, it will be essential for the Federal Reserve to communicate carefully how it assesses the incoming data and to provide clear guidance on what this means for its expected path of the policy rate. In this regard, greater emphasis should be placed on the need for interest rates to remain at high levels for an extended period of time.”

The downside risks associated with a less effective monetary transmission, and a more protracted disinflation, could be further complicated by two additional considerations.

“First, a higher path for interest rates could reveal larger, more systemic balance sheet problems in banks, nonbanks, or corporates than we have seen to date.”

“Second, brinkmanship over the federal debt ceiling could create a further, entirely avoidable systemic risk to both the U.S. and the global economy at a tie when there are already visible strains.”