IMF Executive Board Concludes 2026 Article IV Consultation with the United States

• GDP growth reached 2% in 2025 despite major policy shifts and a Q4 government shutdown, supported by strong productivity. Inflation was flat as tariff-driven goods inflation offset declining services inflation; the fiscal deficit narrowed slightly, though debt and the current account deficit remained elevated.
• Growth is projected to rise to 2.4% in 2026, while fading tariff effects and lower oil prices should bring core PCE inflation back to 2% during the first half of 2027. Employment growth is slowing but unemployment should stay near 4%.
• Near-term risks to growth and unemployment are balanced, but rising energy prices pose upside inflation risks.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for the United States^[1] on April 1, 2026.

The U.S. economy has performed well in 2025. Growth reached 2 percent in 2025 despite major shifts in the policy environment and the government shutdown in the fourth quarter. Strong, broad-based productivity growth has underpinned buoyant economic activity while employment growth has slowed, in part due to sharply lower immigration flows. Inflation has moved sideways during 2025 as tariffs boosted goods prices while services inflation moderated. The federal fiscal deficit fell from 6.3 percent of GDP to 5.9 percent of GDP in fiscal year 2025. General government debt rose to 123.9 percent of GDP, and the current account deficit remained large at 3.7 percent of GDP.

GDP growth is expected to accelerate modestly in 2026 to 2.4 percent (on a q4/q4 basis). The inflationary impulse from tariffs is expected to wane and oil prices to come down from their currently elevated levels, allowing core PCE inflation to fall back to 2 percent during the first half of 2027. The near-term risks to activity and unemployment are broadly balanced but the outlook for global energy prices creates upside risks to inflation.

Employment is expected to grow at less than one-half of the pace seen in the five years prior to the pandemic. However, given the ongoing slowing of working-age population growth, the unemployment rate should remain close to 4 percent in 2026–27. The tax and spending changes that were legislated in 2025 are expected, in the near term, to provide a modest boost to activity and to raise the deficit. The general government deficit is expected to remain in the 7–7 ½ percent of GDP range with debt exceeding 140 percent of GDP by 2031. The applied effective tariff rate on imports to the U.S. is expected to settle at 7–8.5 percent after recent changes to tariff authority take effect. The net effect of higher tariffs and fiscal policy changes for the current account deficit is a modest decline over the medium-term to around 3½ percent of GDP, well above levels prevailing prior to the pandemic. 

Actions are underway to recalibrate or eliminate certain financial regulatory requirements, tailor supervision to the underlying risk of the activity, and introduce a regulatory framework for digital assets. The Federal Reserve has discontinued the runoff of its balance sheet, started to undertake reserve management purchases, and enhanced standing repo operations.

Executive Board Assessment[2]

Executive Directors welcomed the strong performance of the U.S. economy supported by exceptionally strong broad‑based productivity growth, expansionary fiscal policies, and the impact of policy rate cuts. At the same time, Directors expressed concerns about the heightened domestic and global uncertainties posed by the significant ongoing policy shifts and the war in the Middle East. Against this background, they emphasized the need for determined actions to address fiscal imbalances and monitor upside risks to inflation and financial vulnerabilities, anchored in the credibility of the U.S.’s strong institutional framework, which remains a key asset.

Directors stressed the importance of maintaining the Federal Reserve’s careful calibration of monetary policy in a data‑dependent and well‑communicated manner. They agreed that the reductions in the federal funds rate in 2025 were appropriate to guard against a further weakening of the labor market. With the policy rate close to neutral, Directors cautioned that there is little room to cut interest rates in 2026, particularly given the rise in energy prices, the likely passthrough to core inflation, and the upside risks to global commodity prices that are likely to further delay the return to the inflation target. They emphasized that a monetary policy easing would only be appropriate in the event of a material worsening in labor market prospects alongside a decline in inflationary pressures. 

Noting persistently high fiscal deficits, the continued rise in debt‑GDP ratio and an increasing share of short‑maturity debt, Directors stressed the pressing need to address the U.S. longstanding fiscal imbalances through a frontloaded fiscal adjustment. They emphasized that the fiscal trajectory creates a growing financial stability tail risk for the U.S. and for the global economy, given the importance of the U.S. Treasury market for the global financial system. Directors underscored that achieving the needed fiscal realignment will require both an increase in federal revenues and a rebalancing of entitlement programs. Directors also pointed to the need, alongside strong and sustained economic growth, to improve social assistance to raise living standards for lower‑income households. 

Directors reaffirmed their view that international trade has fostered growth and job creation in both the U.S. and abroad. However, they recognized that more needs to be done to eliminate the various policy distortions—both in the U.S. and in other countries—that have led to external imbalances. Directors expressed concern about the shift in U.S. trade policy, noting that the increase in tariffs and in trade policy uncertainty are expected to reduce U.S. activity and create sizeable negative spillovers on its trading partners. They urged the authorities to work constructively with trading partners to address their concerns over the fairness of the global trading system and to agree on a coordinated reduction in trade restrictions, industrial policy and other distortions. A number of Directors also called for greater consideration of global climate objectives in the administration’s energy policies.

Directors expressed concern about the size and persistence of the U.S. current account deficit and agreed with the staff’s assessment that the U.S. external position was moderately weaker than implied by fundamentals and desirable policies. They noted that the likely further decline in the net international investment position raises the risk of an eventual disorderly external rebalancing, which could be precipitated by an abrupt shift in portfolio preferences by foreign investors. To lessen these vulnerabilities, Directors advised that a substantial fiscal adjustment, accompanied by a range of other policies to raise private saving, would be essential.

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