IMF’s Georgieva backs Fed’s stance, sees risks in waiting too long to ease rates By Reuters

By David Lawder

WASHINGTON (Reuters) -International Monetary Fund Managing Director Kristalina Georgieva on Thursday said she anticipates that the Federal Reserve would begin to cut U.S. interest rates in “a matter of months” but cautioned that there was a risk to the global economy of waiting too long to ease policy.

Georgieva told reporters at IMF headquarters that she thinks the U.S. central bank made the right decision on Wednesday to hold rates steady but remain cautious on declaring victory against inflation.

“If you carefully assess the Fed posture, it is one that recognizes the job is not quite yet done, but we are near the end,” Georgieva said.

At the same time, she said the U.S. economy was poised for a “soft landing,” with a strong job market, but “it’s not done. We’re still 50 feet above the ground and we know that until you land it’s not over.”

But she said there was a delicate balance on getting the timing right for beginning to ease rates, adding that keeping them higher for longer than necessary could hurt growth in both the U.S. and emerging market economies.

If the Fed waits too long to cut rates, some emerging market countries with lower rates could see their currencies come under pressure, exacerbating inflation, Georgieva said.

“So the timing of U.S. easing monetary policy is indeed very important – not too early, but also not too late,” she said, adding that she did not think this would be “many months” or a year. “You’re talking about timing that is a matter of months.”

Traders on Thursday continued to pare bets for a March Fed rate cut to 36.5% from almost 90% a month ago, while increasing the likelihood of a May rate cut to 93.3%, according to the CME Group’s (NASDAQ:) FedWatch Tool.