The IMF expects limited room for the Federal Reserve to cut interest rates this year, maintaining the outlook for U.S. growth unchanged.

The International Monetary Fund stated that although U.S. inflation is expected to fall back to the Federal Reserve’s 2% target in the first half of 2027, policymakers have almost no room to cut interest rates this year. According to the IMF’s annual review of the U.S. economy, known as the Article IV consultation, staff members expect the Federal Reserve to cut interest rates only once this year. “Overall, staff believe there is limited room to lower policy rates over the next year,” the IMF staff said in a statement. “A more significant easing of monetary policy would require a clear deterioration in the labor market outlook, while inflation pressures cannot rise, including short-term inflation expectations driven up by oil prices and commodity price increases.” In another statement, IMF Executive Directors said that given the Federal Reserve’s current policy stance close to neutral, “there is limited room for rate cuts in 2026, especially in the context of rising energy prices, which could transmit to core inflation, and the risk of further increases in global commodity prices that could delay the return of inflation to the target.”