(Bloomberg) It's too early to talk about the risk of a recession in the United States, where growth is likely to remain positive in the near future even if it slows down, according to the new chief economist of the International Monetary Fund.
Russia's invasion of Ukraine has had a “considerable impact” on the global economy and will challenge monetary policy makers to control inflation without stifling growth, Pierre-Olivier Gourinchas said Thursday in his first interview since taking office in January. Even so, “we are not facing a recession environment in the US, at least in the near future,” he said. “What we see is similar to a slowdown in growth, but it remains solidly in positive territory.”
The IMF is in the process of updating the forecasts it last issued in January and is scheduled to publish the results in its global economic outlook on April 19. Gourinchas commented that the Fund is still assessing how much it will need to cut growth projections as a result of the Russian invasion of Ukraine, which has triggered energy and food prices.
In the US, concerns about growth prospects are growing as the Federal Reserve accelerates its plans to raise interest rates to combat inflation that was already at the highest levels in four decades, even before the war.
This week, yields on two-year Treasury bonds exceeded those of 10-year debt — the so-called reversal of the yield curve. Consumer confidence has plummeted to a decade low, even though Friday's jobs report revealed a still robust labor market. Citigroup Inc.'s chief global economist said Thursday that the odds of a recession are “significant” over the next 18 months, with a three-in-four chance of a global recession and a one-in-four chance for the US.
Gourinchas joined the IMF in January, replacing Gita Gopinath, who was promoted to the fund's first deputy managing director.
Originally from France, Gourinchas received his PhD in economics from the Massachusetts Institute of Technology and wrote his thesis on exchange rates and consumption. Olivier Blanchard, who later served as chief economist of the IMF, was Gourinchas' thesis advisor.
The war in Ukraine will be the main driver of the downward revisions of the IMF's outlook for 2022, and will likely affect neighboring Europe more than the US, Gourinchas said.
“European economies are more vulnerable,” he said. “They are more dependent on Russian gas, and there could be a greater impact on aggregate demand.”
The Fund is also closely watching likely disruptions due to new pandemic closures in China, Gourinchas said.
Central bankers face a major challenge as they try to get economies back on a path of stable inflation without stifling growth, and their response is likely to vary depending on their proximity and trade links with Russia and Ukraine, he said.
Original Note:
U.S. Economy Looks Strong Enough to Avoid Recession, IMF Says
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