IMF sees 'buoyant' US economy accelerating this year but warns of risks from tariffs, rising debt

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WASHINGTON (AP) — A “buoyant'' U.S. economy is poised to see accelerated growth and lower unemployment this year. But big federal budget debts ”represent a growing stability risk,'' the International Monetary Fund said Wednesday.

The 191-country lending organization's assessment of the world's biggest economy was mostly positive. The IMF saw U.S. gross domestic product — the country's output of goods and services — growing 2.4% in fourth-quarter 2026 from the last three months of 2025, up from 2.2% growth the year before.

It sees U.S. unemployment dropping from 4.5% in late 2025 to 4.1% in 2026 and inflation falling to the Federal Reserve's 2% target by 2027. IMF managing director Kristalina Georgieva said the Fed, which cut its benchmark interest rate three times in 2025, could afford to push it down to around 3.4% from 3.6% currently. But it should hold off on deeper cuts barring a "material worsening'' in the American job market, she said.

The United States has been helped by strong productivity growth. But Georgieva said the U.S. economy would have performed even better without President Donald Trump's big taxes on foreign imports. The fund's report warned that the president's protectionist trade policies "could represent a larger-than-expected drag on activity.''

The IMF expressed concern about the federal government's debts, which it sees rising steadily from just under 100% of U.S. GDP last year to almost 110% by 2031.