Speakers:

Kristalina Georgieva, Managing Director, IMF

Nigel Chalk, Director, Western Hemisphere Department, IMF

Moderator:

 Julie Kozack, Director, Communications Department, IMF

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MS. KOZACK: Good afternoon, everyone. It's a pleasure to have you all here today.  This is our press conference for the U.S. Article IV Consultation for 2026.  We hope you have had a chance to review the concluding statement, which was placed under embargo.

I am delighted to be here with our Managing Director, Kristalina Georgieva, and our U.S. Mission Chief, Nigel Chalk. 

What we'll do today is we will start with Kristalina.  She will share with you, through opening remarks, her takeaways from her meetings that concluded earlier today, and then we'll have time for some questions. 

We have 30 minutes for this press briefing, and I will now turn to Kristalina for her opening remarks. 

MS. GEORGIEVA: Thank you very much, Julie, and great to have you all in the room and online.

We have held meetings with Secretary Bessent and Chair Powell today.  Very good meetings, very substantive.  And I want to start by expressing our gratitude to the leadership and staff of the U.S. Treasury, the Federal Reserve, and other agencies for multiple discussions they have had with our team over the past several weeks.  Secretary Bessent particularly underscored the value he places on frank, candid, and even-handed surveillance by the IMF. 

In our concluding statement, we note that U.S. policymakers have embarked on a systemic reorientation of the U.S. economy to boost the living standards of the American workers.  The administration aims to do so by increasing economic self-reliance, supporting domestic manufacturing, reducing the trade deficit and reliance on foreign-produced goods, investing in domestic energy output, securing the border, and scaling back the federal government's role in the economy. 

Our consultation for 2026 focuses on the macroeconomic effects of this important shift in policies, and on that, I would like to make four points.  First, we expect that a buoyant U.S. economy will continue to grow strongly throughout this and next year.  In 2025, growth reached 2.2 percent on a fourth quarter to fourth quarter basis, and this is close to our January 25th projection, despite significant swings in trade during the year and a sizable drag from the government shutdown in the fourth quarter.  Unemployment has remained relatively low, the rate of participation in the labor force by prime-age workers has been rising, and real incomes have been increasing -- and this is so good news. 

Undoubtedly, the story of 2025 has been the remarkable performance of U.S. private sector entrepreneurs and workers.  The level of innovation, adaptability, and resilience has been impressive.  The U.S. sits solidly at the frontier globally in terms of dynamism, know-how, and technology, and this has been most clear in the strength of labor productivity.  It has helped to support growth in the United States and also to create positive spillovers to the global economy. 

And there is an upside risk that technology, investment inflows, and the administration's focus on reducing red tape will bear fruit, and they would support greater economic dynamism and growth.  At this stage, it is difficult to quantify the potential of this impact, so we will have to continue to monitor these factors and how they impact growth in the United States carefully. 

So, what do we expect?  We expect the economy to accelerate somewhat in 2026, growing at a healthy 2.4 percent on a fourth-quarter-over-fourth-quarter basis and to continue in a similar pace into 2027.  We also expect the unemployment rate to fall somewhat to around 4 percent. 

Finally, inflation has remained around 3 percent throughout 2025, although services inflation has been steadily falling.  Goods inflation has been somewhat affected by tariffs, but we expect that to wane and for inflation to return to the Federal Reserve's 2 percent target by early 2027.  Given this inflation outlook, we believe it was appropriate for the Fed to cut interest rates during 2025 and to return monetary policy to broadly neutral settings. 

Second, we see the near-term risks to activity, unemployment, and inflation as broadly balanced.  The Fed has been calibrating policy well to the balance of risk between inflation pressures and slowing job growth.  Under staff's baseline outlook, bringing down the federal funds rate modestly to between 3.25 and 3.5 percent by end 2026 will be consistent with an economic economy returning to full employment and inflation setting around the 2 percent target. 

A larger monetary easing than the one I described would need to be based on a material worsening in the outlook for the labor market.  This is not in our baseline, but we recognize it is nonetheless.  Of course, what I'm telling you is just a forecast.  Much could change in the coming months.  We know that we operate in an environment of higher uncertainty, and as a result, the Fed will need to be attentive to incoming information and should continue to communicate their evolving views clearly to the public. 

Third, the continuing rise in public debt remains a concern.  This is something we have been highlighting in previous Article IV’s, and it is important to note that it remains a major issue to be attentive to. 

Good news, in 2025, the federal government deficit did decline.  However, we believe that even though the fiscal changes put in place in 2025 will provide a modest near-term boost to activity in 2027, 2026-2027.  They will also raise the deficit, and indeed what we expect is both federal and general government debt to go up, with the latter reaching 140 percent of GDP by 2030. 

Putting public debt on a decisively downward path will require determined actions in line with Secretary Bessent's views on lowering the federal deficit.  We have some recommendations in this regard, considering a broad range of policies to raise tax revenues and address structural imbalances in programs such as Social Security and Medicare.

And let me go to fourth, say a few words about tariffs.  We share the administration's concern about the size of the U.S. trade and current account deficit.  This imbalance needs to be addressed, and doing so will benefit the U.S. and it will benefit the global economy.  We also recognize that more needs to be done to eliminate the various policy distortions in the U.S. and in other countries that have led to these high external imbalances, and we are advocating for urgent action on that.  We have been talking about it, various venues.

In the U.S., though, tariffs have a negative supply effect, and this has added to goods inflation, as I just mentioned before, which has been a headwind to ever stronger growth.  We could have seen more of the good news.  Over the longer horizon, the tariffs distort resource allocation, and they wait on productivity.  And this is the reason why we encourage the U.S. to work constructively with its trading partners to address these mutual concerns and agree on a coordinated reduction in distortions and trade restrictions that are adding to these global imbalances. 

Now, let me make a point for the record.  As you have seen in the concluding statement, we have not opined on the Supreme Court decision on tariffs, and there is a reason for that.  Our standard practice is to finalize the concluding statement and share it with the authorities.  This has happened for the U.S. on February 20, roughly a week before the publication today.  So, what you got today, the authorities got a week ago, and we could not take the implications of that decision into account. 

Now, this being said, we recognize these are important developments.  We are digesting them.  We will analyze their economic implications.  We will be publishing the Staff Report for the United States Article IV several weeks from now and, of course, we will be publishing a new World Economic Outlook in mid-April.  So, stay tuned, anticipate that there will be more on this topic at that time. 

So let me conclude in the following way.  The U.S. economy continues to deliver an impressive performance, and it has proven agile in adapting to shifting policies.  The level of private sector-led investment and the degree of dynamism and innovation have been impressive.  Productivity gains have been broad-based across a number of sectors, and this good news provides an important opportunity for the administration to address the long-standing fiscal imbalance, to further support private sector dynamism through well calibrated partners policies, and to work with trade partners to lessen trade distortions.  So overall, a good year for the U.S. and an opportunity to do more. 

Julie, back to you. 

MS. KOZACK: Very good. So, we will now open the floor for questions. Please, when you're called, give your name and your affiliation.  And if you're online, please make sure to turn on your camera and your microphone when, when and if called on. 

All right, let's open the floor.  We'll start with you. 

QUESTIONER: Thank you, Madam Georgieva.  You did note some concern about the current account deficit of the U.S.  Now, as you know, the Trump administration is switching to a different set of tariffs that are based on dealing with current account or balance of trade problems.  So, I'm just wondering, does the U.S., currently in the IMF's estimation, have a large and concerning current account deficit, you know, that, you know, would be in line with the language of this particular law?  You know, does the U.S. have a balance of payments crisis? 

And then furthermore, just asking you also about the fiscal trajectory of the U.S. Certainly, quite a bit above where Secretary Bessent wants it to be.  He wants 3 percent deficits compared to GDP of the U.S.  How much time does he have, and subsequent administrations have to sort of bring this U.S. fiscal trajectory into line before we get to a point where things are more prone to crisis?  Thank you. 

MS. GEORGIEVA: Thank you very much. Good to see you. To start with, your first question, we have a methodology to assess external positions of our members.  And when we apply this methodology to the U.S., the conclusion is that the current account deficit is too big just to make it very simple for the audience.  And that is recognized by the administration.  It has to be addressed, and it is something that we at the Fund have been working for quite some time to analyze and provide some inputs.  And actually, I'm going to ask in a second, Nigel, tell you a little bit more about it. 

We do recognize the importance of the U.S. to take a path to reducing the debt and deficit.  I talked about that.  We are now looking, so you have, on one side, you have the current account deficit, which is too high, and then on the other side, you have the federal budget in deficit, and you have debt levels in the United States that have continued to grow. 

The U.S. is a large economy.  It, as I said, it has proven to be incredibly dynamic.  Actually, it is the only advanced economy where we see consistently year after year, high productivity growth that drives high growth in the country.  So, it is not an economy where this is an immediate pressing concern either.  It is an immediate pressing concern to fix in year 2026, in year 2027.  But yes, over time, our recommendation is and continues to be that significant efforts would be necessary.  We talk about reducing the deficit in line with Secretary Bessent's aspiration to bring it down to 3 percent.  That would take attention to both raising revenues and managing expenditures. 

And since we have the luxury of Nigel sitting right next to me, and Nigel has been how many years on --

MR. CHALK: Oh, I don't want --

MS. GEORGIEVA: You don't want to go there. But here is the person who can give you, who can provide you with more details in response to your question and to everybody here.

MR. CHALK: So, just to pick up on what Kristalina said. So, clearly, the U.S. current account deficit is too big. It's not an immediate problem that needs to be solved tomorrow.  It's something that we think needs to be solved over the medium term to bring it down to more sustainable levels.  And I would just draw the link between what Kristalina said on the fiscal and on the current account.  One of the ways to bring the current account down is to address the fiscal problem.  If they address the fiscal problem in the U.S., the U.S. fiscal savings will go down, and that automatically will help reduce the current account deficit. 

The other thing that could be done in the U.S.  And I think there's some efforts to try and do this in the policy of the new administration, is to try and find ways to increase U.S.  household savings.  So that could be through more generous tax incentives, through retirement plans, saving incentives for education, for children.  So, there's some efforts to try and do some of that. 

And then the third thing I would highlight, to bring down the U.S. current account deficit actually requires actions in countries outside of the U.S.  And so, by those countries, I think as Kristalina said in the opening remarks, by addressing their imbalances, by addressing their distortions that are creating large current account surpluses in those countries will automatically help reduce the current account deficit in the U.S. as well. 

So, it's a very complicated thing.  There's multiple streams to it.  But I think this is something that should be done over the medium term, and we'll be pretty consistent over the years in making that case. 

MS. KOZACK: Thank you. Let's keep the floor open. We'll go to the corner in the back. 

QUESTIONER: Thank you very much.  Towards the end of the report, you mentioned the strong institutional framework that the U.S. has, and you mentioned that the existing institutional protections and resourcing of some of those institutions need to be respected and protected.  I was wondering if you could just divulge a little bit more on that position and why you made it.  You also mentioned three organizations.  You mentioned Revenue Administration, Financial Oversight, and Economic Statistics.  Why those three and why the decision to leave monetary policy out, given that there has been some issues raised about the independence of the Fed, too?  Thank you. 

MS. GEORGIEVA: So, we know from decades and decades of experience that strong institutions provide the foundation for good policy decisions, especially when it comes down to understanding what is going on in the economy, in other words, collecting data. And we at the Fund do a lot to support countries in that regard. Definitely, the importance of supervisory authorities to be able to do their job in a way that guarantees their effectiveness.  And we know well that independent central banks perform a very important function to provide monetary policy guidance, set the interest rates at the right place, make sure that inflation is, well, expectations are well anchored.  

So, we know that.  And in fact, we recently did look into developments in emerging market economies, and it was very rewarding to see how much emerging markets have moved over the last decades in setting up institutions with the right skills and right mandates to do their job.  So, in that sense, we do believe that it has been in the history of this country that strong institutions support growth.  And in the future of this country, of course, that would continue to be the case.

So, we recognize, I'm actually going to ask Nigel, why didn't -- why did we list those three?  Let's see, what's the answer?  Actually, you gave me a great question to ask.  I wish I had it this morning when we were doing the prep for today. 

MR. CHALK: Okay, so two things. One, on the Fed, we do earlier on in the statement, under the monetary policy, we do recognize that it's very important that the Fed's monetary policy decisions remain independent, as they currently are, and very focused on maintaining their statutory framework.

We chose to separate the Fed and the U.S. government as different entities.  On the U.S. government, we've seen a very significant reduction in federal employment.  Around 15 percent of the federal workforce has been lost over the past year.  We want to make sure that that doesn't have an impact, as Kristalina said, on key functions like regulatory oversight, like statistics agencies. 

Why those agencies in particular?  In part, those are our natural counterparts.  They're the main economics agencies.  But I think there's also an aspect that -- that revenue administration statistics agencies, I think in the U.S. and elsewhere, often are underfunded and very much create a very important public good that we feel should be invested in.  So, we just wanted to make sure that that wasn't going to be a casualty of the federal downsizing.

MS. GEORGIEVA: And of course, given the role of the U.S. dollar, the Fed is important for U.S. businesses and households. It is also important globally.  It has significance for the world economy. 

MS. KOZACK: Okay, let's go, we'll go to right here in the front.

QUESTIONER:  Thank you so much, Managing Director.  I would like to ask about a specific part of the report on immigration policies.  The IMF notices that there's an impact on job creation and on growth as well.  I would like to ask first if you, as the IMF, has identified any specific sector that is suffering the most because of these immigration policies?  And secondly, in your talks with U.S. authorities, did you have any specific feedback on this?  Because, of course, this is a policy that the administration is leading.  So, wondering if they have reached out with a different number or a different point of view.  Thank you so much. 

MS. GEORGIEVA: We look at the labor market in the aggregate, so we don't have the attention to specific sectors. And when we look at the labor market on the aggregate, what we see is that demand for labor has gone somewhat down.  At the same time also supply of labor has gone down.  And that, in a sense, provides for labor market stability.  Unemployment is, as I said, going towards around 4 percent, which is a good place for this indicator. 

The U.S. administration looks at immigration also, both from the perspective of the economy and from the perspective of national security.  And in that context, they are looking at illegal immigration as something that has relevance for national security.  We look at that immediate issue strictly from the perspective of what is the balance of the labor market.  And I can tell you that this time around, it's more difficult to establish that because we simply don't know. 

When we look forward next year, the year after, whether as a result of increasing productivity, and we all recognize that artificial intelligence may have quite a lot to do with that.  Perhaps demand for labor would go further down, maybe in some segments of the labor market more than in others.  That needs to be ascertained.  And then what does it mean in terms of what is happening in supply of labor?  Would that be -- will we see a point when this is stabilizing at a certain level?  And would there be a good match between demand for skills and availability of those skills on the labor market?  And that is for us, for the next year, for the next Article IV, a question we have to get more deeply into. 

Nigel, you want to add something. 

MR. CHALK: No, that’s good.

MS. KOZACK: Okay, very good. We are quickly running out of time, so I'm going to take one more question.

QUESTIONER: Thank you for taking our question.  I just wanted to follow up on the issue of trade restrictions.  You know, you mentioned that the U.S. should work with partners to address concerns and seek a coordinated reduction in trade restrictions.  How do you assess the administration's latest move to impose new tariffs, which could go up to 15 percent for various partners?  And in your talks with Secretary Bessent, you know, has he seemed open to this, the IMF's call to narrowly implement restrictions like tariffs on national security grounds moving forward?  Like how has the administration responded also to these -- to these concerns?

MS. GEORGIEVA: So, when we look at the developments in trade, let me make two observations. The first one is that when tariffs were announced in April, that did create some anxiety globally and uncertainty among U.S. trading partners.  Since then, there have been agreements reached on a bilateral level.  And our understanding is that the intention of the administration is to keep that predictability created through agreements, bilateral agreements, to keep it active, to stay with it. 

While the tariffs for U.S. partners for some of them have been more difficult because of high exposure to exporting the United States, for others they have been less of an issue because of lower exposure.  We can now see that from the announced tariffs in April to what is being collected, it has been in the interest of countries a positive development.  In other words, what was announced was around 23 percent.  What is now being collected is more in the order of around 10 percent.  And given that U.S. participation in exports and imports, with the size of the U.S. economy and the big domestic market, is somewhere around 13-14 percent of the U.S. GDP, that means that the impact is more moderate, more muted than in April was expected. 

We have not yet been able to assess what would be the impact of moving towards a different legal foundation and therefore different tariffs.  We don't know what exactly the administration's plans are.  We don't know how would the partners of the U.S. react.  More likely than not, there would be some continuity.  So, I'm not going to opine on what that may look like.  What I would say is that we have seen around the world a fairly strong commitment to keep trading with us in a defined manner, and also countries to trade with each other.  And even more, we have seen more bilateral and plurilateral agreements as a result. 

My very simple message is that we have been trading as humanity for thousands of years.  Trade is like water.  You put an obstacle, it goes around it, and it is for a reason, because trade helps us to have globally better allocation of resources and as a result get better outcomes for people.  So, we expect to see that there would be more clarity given by the administration, and we would see in our analysis, in the report a couple of weeks from now, and at the Spring Meetings, more to say. 

MS. KOZACK: Very good.

MS. GEORGIEVA: Take one more. There was this gentleman here, I feel for him. He has been raising his hand.

MS. KOZACK: All right. Over to you.

QUESTIONER: Thank you so much.  I have two questions, but let me ask --

MS. GEORGIEVA: So, I'd like to have a question, and you want two.

QUESTIONER: Anyway, I will ask two.  So, first of all, about private debt.  In February, we have seen that private household debt in the U.S. climbed to U.S. $18.8 trillion, which is a new record high.  From your standpoint, are there any risks for transmitting this issue to the economic -- to the economic activity, to the economic growth, et cetera, or is it normal in the U.S. to see constantly growing private household debt?  And the second question, the U.S. President Donald Trump has already announced his plan to increase the defense budget in 2027 to U.S. $1.5 billion -- trillion U.S. dollars.  From the IMF standpoint, is there any fiscal space for it right now, or the growing of the U.S. government debt is the only way forward?  Thank you so much. 

MS. GEORGIEVA: So, to your first question, what we see in the United States in terms of the financial sector, both on the corporate front and in households, is a pretty good picture. We need to remember that there are two things in the U.S.  One is how attractive the U.S. is for financial flows from other countries.  Meaning that the fuel for growth in the U.S. is coming at a high octane, it is coming at a high level.  And we don't really see concerns around households being able to serve there that level, neither corporations in the U.S. What we need to recognize is then when you have a high level of employment, and you have a buoyant economy, productivity going up, that creates space for households to feel more comfortable to spend.  You have a job, you earn money, you spend money. 

To your second question, the U.S. is in a position to fund its spending, its government spending. We, however, do recommend that medium-term attention has to be paid to bring debt and deficit down. When you have investments from the public purse, they also generate spillover impact within the country, going back to the people that the private debt going up, more jobs, better-paying jobs, people spend more.  And we need to remember that this also is good for the world as a whole because a U.S. that grows, has high productivity, grows rapidly, and has the ability to create more opportunities for others has a positive spillover effect for the rest of the world.  This being said, please be careful.  Look at the deficit and debt levels.  Bring them down,

Nigel?

MR. CHALK: Yeah, so just an annotation on the private. So, you can't just look at the private debt. You have to look at the whole balance sheet of the household sector.  And they have a lot of assets that have appreciated in value both in the financial sector and in housing.  If you look at their balance sheet as a whole, it looks pretty healthy. 

However, there are some segments that we do concern about particularly.  It's not always the case that the ones with the assets and the ones with the debt of the same households. And I would just highlight too that student debt in this country is very high, and it creates a burden, and we see it impacting macro variables like consumption because people have that burden as a service.  And then for lower-income households, we're starting to see some strains in their indebtedness.  Not anything, I think, particularly unusual for this position in the cycle and the economic cycle.  But still, there's some concerns that is becoming more difficult for that segment of the population. 

MS. GEORGIEVA: Okay, very good. Burned a question for next time when we get together.

MS. KOZACK: All right, very good. I will now bring this press briefing to a close.

As indicated, we will be entering now the next phase of our U.S. Article IV, which is preparing the Staff Report for presentation to our Board, after which, of course, it will be published and made available to all of you. 

Thank you so much for joining us, and we wish you all a wonderful rest of your afternoon and evening.  Thank you.