IMF: US inflation won’t reach Fed target until 2027, delaying interest rate cuts

The International Monetary Fund said on Wednesday that US inflation will not return to the Federal Reserve’s 2% target until early 2027.

Pointing This assessmentpart of the Trump administration’s first Article IV review of the International Monetary Fund, suggests that significant rate relief is still a long way off despite the president’s optimism.

The IMF knows the financial risks

The US current account deficit is “very large,” International Monetary Fund Executive Director Kristalina Georgieva told reporters. The Fund estimates the ratio between 3.5% and 4% of GDP in the short term.

But the prescription of the IMF goes against the approach of the administration. Fiscal consolidation – not tariffs – is the best way to reduce the deficit, said Nigel Chalk, the Fund’s Western Hemisphere Director. This recommendation comes later The Supreme Court reversed Trump imposed sweeping emergency tariffs that were deemed illegal, forcing the administration to invoke Section 122 of the Trade Act of 1974 to impose replacement duties.

The financial picture is tight. The International Monetary Fund expects the US federal deficit to remain between 7% and 8% of GDP in the coming years. This is more than double the levels targeted by Treasury Secretary Scott Besent. Consolidated government debt is on track to reach 140% of GDP by 2031.

“The upward trajectory of the public debt-to-GDP ratio and the rising level of short-term debt to GDP represent a growing stability risk for the United States and the global economy,” the Fund warned.

Trump’s interest rate optimism versus structural reality

The IMF assessment was released a day later From Trump’s State of the Union addressThe president painted a rosy picture about borrowing costs. He stated that mortgage rates were at a four-year low and that annual mortgage costs had fallen by about $5,000 since he took office. He framed low interest rates as a solution to what he called “the housing problem that Biden created.”

However, the IMF figures tell a different story. With inflation not reaching the Fed’s target until 2027 and fiscal deficits rising to twice the administration’s targets, the structural case for higher interest rates for longer has become stronger. The fund set US growth for 2026 at a resilient 2.4%, leaving the Fed with no urgency to ease.

What does this mean for digital currencies?

The implications for risk assets are clear. Steady inflation and rising fiscal deficits make aggressive interest rate cuts less likely this year. For digital currency markets, which have grown on expectations of lower interest rates until the end of 2025, the IMF’s cautious assessment is reinforced.

The deeper irony is that the administration’s fiscal expansionism—including what the International Monetary Fund refers to as historically large tax cuts—is the main driver of the deficits that keep prices high. Trump wants lower interest rates, but is pursuing policies that structurally impede them.

The IMF did not expect a crisis, noting that “the risk of sovereign stress in the United States is low.” But the trajectory you describe—rising debt, persistent deficits, lagging inflation—points to an environment in which interest rate relief is coming slowly, if at all.