A few days before the president-elect returns to the White House, Pierre-Olivier Gourinchas, head economist at the International Monetary Fund (IMF), told AFP that Donald Trump’s economic proposals run the risk of rekindling US inflation.
Gourinchas stated in an interview that Trump’s plans to increase tariffs and restrict immigration would probably limit the economy’s supply side and raise costs.
He said that other policies the president-elect has proposed, such reducing taxes and red tape, would potentially increase demand and drive inflation.
“The bottom line is, when we look at the risk for the US, we see an upside risk on inflation,” he said.
Gourinchas spoke to AFP at the IMF’s headquarters in Washington ahead of the publication of its flagship World Economic Outlook (WEO) report on Friday.
In the WEO update, which did not account for Trump’s proposals due to policy “uncertainty,” the IMF raised its forecast for global growth and sharply hiked its outlook for the US economy.
Although Trump and his advisers have resisted, many economists view his immigration and tariff policies as inflationary, claiming that the total set of policies he intends to implement should help control prices.
According to statistics from CME Group, traders have reduced the amount of rate cuts they anticipate the US Federal Reserve will make in 2025, giving it an almost 80% likelihood of making no more than two quarter-point cuts this year.
According to Gourinchas, the IMF anticipates that the Fed will lower interest rates by half a percentage point in 2025 and 2026, which is consistent with the median prediction of Fed officials polled in December.
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