The IMF on Wednesday warned that a U.S. economic downturn remains “within the realm of possibilities,” despite encouraging data to the upside.
Gita Gopinath, the IMF’s first deputy managing director, said the fund had been surprised by the strength of the U.S. labor market and consumer spending, prompting it to revise up its economic growth forecasts for the country.
Her comments came shortly after the latest U.S. inflation data showed signs of cooling.
“If you look at the very recent data, you see some signs of softening,” Gopinath told CNBC’s Joumanna Bercetche in Washington, D.C.
“That gives us the possibility that we could avoid a recession,” she said.
The IMF on Tuesday released its latest World Economic Outlook report, in which it said it sees the U.S. economy expanding by 1.6% this year, up from the 1% forecast in 2022.
Still, Gopinath noted the economy remains in a precarious position, with little room for error.
“If you look at our growth numbers, we’re looking at very low growth numbers for the U.S., and so the risks of a hard landing remain,” she said.
Asked if such a shift from growth to low or even negative growth could be prompted by the Federal Reserve’s ongoing interest rate hikes, Gopinath said it was conceivable.
“It is within the realm of possibilities that events of this kind could happen,” she said.
However, she added that central banks had so far been striking a good balance.
“This is a very difficult time for central bankers,” Gopinath added. “I think, as of now the Fed, has been correct about keeping its eye on inflation and of course adjusting depending upon how the data comes in.”
