By David Lawder
WASHINGTON (Reuters) – International Monetary Fund Managing Director Kristalina Georgieva said Americans should “cheer up” about the U.S. economy, as inflation subsides further in 2024 amid a strong job market and moderating interest rates.
Georgieva told CNN in an interview that aired on Tuesday that the U.S. economy is “definitely” headed for a “soft landing” with fairly strong growth prospects.
“People should be feeling good about the economy because they finally would see relief in terms of prices,” Georgieva said, praising the Federal Reserve’s “decisiveness” in raising interest rates to fight inflation.
“While that has been painful, especially for small businesses, it has brought the desired impact without pushing the economy into recession,” Georgieva added.
Asked why many polls show Americans pessimistic about the economy, the IMF chief said that consumers had become accustomed to low inflation and very low interest rates for many years, and when both jumped in recent years, it was a shock.
“My message to everyone is, you have a job and interest rates are going to moderate this year because inflation is going down. Cheer up. It is a new year, people,” Georgieva said.
Georgieva repeated her warnings against fragmentation of the global economy along geopolitical lines due to increasing national security restrictions, with countries gravitating towards separate blocs led by the United States and China.
Allowed to continue, she said this could ultimately reduce Global GDP by 7% – roughly equal to the annual out put of France and Germany,” and urged Washington and Beijing to compete on a rational basis, while cooperate on globally important issues.
“So we are all better off to find ways to reduce frictions, to concentrate on security concerns that are real and meaningful, and not go willy-nilly in fragmenting the world economy. We would end up with a smaller pie,” Georgieva said.
(Reporting by David Lawder; Additional reporting by Andrea Shalal in Christiansted, St. Croix)