© 2022 International Monetary Fund

IMF Country Report No. 22/220

UNITED STATES

2022 ARTICLE IV CONSULTATION—PRESS RELEASE; 

STAFF REPORT; AND STATEMENT BY THE EXECUTIVE 

DIRECTOR FOR THE UNITED STATES

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions 

with members, usually every year. In the context of the 2022 Article IV consultation with 

the United States, the following documents have been released and are included in this 

package:

• A Press Release summarizing the views of the Executive Board as expressed during its

July 11, 2022 consideration of the staff report that concluded the Article IV 

consultation with the United States.

• The Staff Report prepared by a staff team of the IMF for the Executive Board’s 

consideration on July 11, 2022, following discussions that ended on June 15, 2022, 

with the officials of the United States on economic developments and policies. Based 

on information available at the time of these discussions, the staff report was 

completed on June 24, 2022.

• An Informational Annex prepared by the IMF staff.

• A Staff Supplement updating information on recent developments.

• A Statement by the Executive Director for the United States

The IMF’s transparency policy allows for the deletion of market-sensitive information and 

premature disclosure of the authorities’ policy intentions in published staff reports and 

other documents.

Copies of this report are available to the public from

International Monetary Fund • Publication Services

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International Monetary Fund

Washington, D.C.

July 2022
PR22/254

IMF Executive Board Concludes 2022 Article IV Consultation 

with the United States

FOR IMMEDIATE RELEASE

Washington, DC – July 11, 2022: The Executive Board of the International Monetary Fund 

(IMF) concluded the Article IV consultation1 with the United States.

The United States (U.S.) has recovered quickly from the pandemic shock. The positive effects 

of unprecedented policy stimulus, combined with the advantages of a highly flexible economy, 

have resulted in an unemployment rate that is back at end-2019 levels, output that is now 

close to its pre-pandemic trend, wages have increased rapidly for lower income workers, 

poverty has fallen, and 8.5 million jobs have been created since the end of 2020.

However, the rapid recovery of demand and associated depletion of slack, rising energy 

prices, and ongoing global supply disruptions have led to a significant acceleration in inflation. 

Wage and price pressures are broad based had have spread quickly across the economy. 

Longer-run measures of inflation expectations have started to drift higher and shorter horizon 

measures of inflation expectations have increased significantly.

During the pandemic, the overall general government deficit rose by close to 9 percent of GDP 

with the US$1.9 trillion American Rescue Plan—passed in March 2021—slowing the pace of 

fiscal contraction in 2021–22 but not forestalling it. The fiscal deficit is now declining rapidly 

but, despite this, public debt is markedly higher than its pre-pandemic levels and is expected 

to continue to rise as a share of GDP over the medium term (as aging-related expenditures on 

healthcare and social security feed into the debt dynamics).

Finally, monetary policy has begun an assertive tightening cycle with interest rates rising by 

150bps so far this year and expected to continue to increase at a fast pace in the coming 

months. At the same time, the process of shrinking the Federal Reserve’s balance sheet has 

begun.

Executive Board Assessment2

Executive Directors agreed with the thrust of the staff appraisal. They welcomed the strong 

economic recovery from the COVID-19 shock as a result of the unprecedented monetary and 

fiscal policy support. Directors noted, however, that the rapid rebound is accompanied by a 

broad-based surge in inflation, posing systemic risks to both the United States and the global 

economy. In this context, they stressed that the policy priority must be to expeditiously slow 

price growth without precipitating a recession.

1

Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff 

team visits the country, collects economic and financial information, and discusses with officials the country's economic developments 

and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

2

At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, 

and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: 

http://www.IMF.org/external/np/sec/misc/qualifiers.htm. 
2

Directors welcomed the June monetary policy tightening and the decision to provide forward 

guidance on the path for the federal funds rate, which should create the necessary up-front 

tightening of financial conditions to quickly bring inflation back to target. Directors stressed the 

need to telegraph, well in advance, clear guidance on the path for the policy rate to ensure 

that the withdrawal of monetary accommodation is orderly and transparent. As part of the 

policy mix, a number of Directors also saw merit in implementing a medium-term strategy for 

fiscal deficit reduction, which would help place public debt on a downward path and support 

anchoring inflation expectations.

Directors recognized that calibrating the response to inflation comes with high stakes and that 

misjudging the policy mix—in either direction—will result in sizable costs at home and 

negative spillovers to the global economy. They concurred that avoiding a recession in the 

United States is becoming increasingly challenging and that the Russian invasion of Ukraine, 

the lingering COVID-19 pandemic, and supply side constraints create additional challenges.

Directors welcomed the resilience of the financial system despite the adverse shocks of the 

past two years and the establishment by the Federal Reserve of two new facilities to maintain 

the smooth functioning of financial markets. In this context, Directors encouraged the 

authorities to implement the remaining FSAP recommendations to further strengthen the 

financial system.

Directors welcomed the passage of the Infrastructure, Investment, and Jobs Act but 

emphasized that passing the rest of the administration’s reform agenda is crucial to foster the 

supply side of the economy and contribute to reduce inflation. They called on the authorities to 

continue making the case for strengthening the social safety net and for changes to tax, 

spending, and immigration policies that would foster labor force participation, investment, and 

innovation. Directors also recommended rolling back the trade restrictions and tariff increases 

that were introduced over the past five years. More generally, they called on the authorities to 

work actively with trading partners to strengthen the rules-based multilateral trading system 

centered around the WTO.

Directors called for more determined action to facilitate a smooth transition to a low carbon 

economy and achieve the climate goals. They recommended broad-based pricing of carbon 

and other pollutants, sectoral feebates, regulatory restraints on emissions, the elimination of 

subsidies for fossil fuels and carbon-intensive agriculture, and a reprioritization of public 

spending toward mitigation and adaptation goals. Directors stressed the importance of 

meaningfully supporting those who bear a disproportionate share of the burden of adjustment.

It is expected that the next Article IV consultation with the United States will be held on the 

standard 12-month cycle.
3

United States: Selected Economic Indicators

(Percentage change from previous period, unless otherwise indicated)

Projections 

2019 2020 2021 2022 2023 2024 2025 2026 2027

National Production and Income

Real GDP 2.3 -3.4 5.7 2.3 1.0 1.2 1.8 2.1 1.9

Real GDP (q4/q4) 2.6 -2.3 5.5 1.0 0.6 1.4 1.9 2.1 1.7

Net exports 1/ -0.2 -0.3 -1.4 -0.9 0.4 0.3 0.1 0.0 0.0

Total domestic demand 2.4 -3.0 6.9 3.0 0.6 0.8 1.6 2.0 1.8

Final domestic demand 2.4 -2.5 6.5 2.0 0.8 1.1 1.6 2.0 1.8

Private final consumption 2.2 -3.8 7.9 2.2 0.5 1.0 1.4 1.8 1.8

Public consumption expenditure 2.0 2.0 1.0 -0.5 1.1 1.2 1.3 1.3 1.3

Gross fixed domestic investment 3.1 -1.5 6.1 3.0 1.4 1.1 2.5 2.9 2.4

Private fixed investment 3.2 -2.7 7.8 3.7 0.9 0.6 2.3 2.8 2.8

Public fixed investment 2.9 4.2 -1.8 -1.1 4.4 4.1 3.9 3.4 0.5

Change in private inventories 1/ 0.1 -0.5 0.3 1.1 -0.2 -0.2 -0.1 0.0 0.0

Nominal GDP 4.1 -2.2 10.1 9.0 4.1 3.2 3.7 4.0 3.8

Personal saving rate (% of disposable income) 7.7 16.4 12.2 5.0 6.8 8.0 8.6 8.4 8.4

Private investment rate (% of GDP) 17.9 17.4 17.9 19.2 18.8 18.4 18.4 18.5 18.7

Unemployment and Potential Output

Unemployment rate 3.7 8.1 5.4 3.7 4.6 5.2 5.0 4.6 4.5

Labor force participation rate 63.1 61.8 61.7 62.3 62.4 62.5 62.4 62.2 62.0

Potential GDP 1.6 0.4 1.8 2.2 2.0 1.9 1.8 1.7 1.7

Output gap (% of potential GDP) 0.7 -3.2 0.5 0.6 -0.4 -1.1 -1.2 -0.8 -0.7

Inflation

CPI inflation (q4/q4) 2.0 1.2 6.7 6.6 1.9 1.9 1.9 2.0 2.1

Core CPI Inflation (q4/q4) 2.3 1.6 5.0 5.4 2.4 2.2 2.2 2.3 2.3

PCE Inflation (q4/q4) 1.5 1.2 5.5 5.2 2.0 1.8 1.8 1.9 1.9

Core PCE Inflation (q4/q4) 1.6 1.4 4.6 4.4 2.2 2.0 2.0 2.0 2.0

GDP deflator 1.8 1.2 4.1 6.6 3.0 2.0 1.9 1.9 1.9

Government Finances

Federal balance (% of GDP) 2/ -4.7 -15.0 -12.4 -4.6 -4.7 -5.3 -6.1 -6.0 -5.8

Federal debt held by the public (% of GDP) 79.4 100.3 99.6 98.4 98.5 100.7 103.5 105.6 107.4

General government budget balance (% of GDP) 2/ -5.7 -14.5 -10.9 -4.8 -5.4 -6.2 -6.9 -6.8 -6.7

General government gross debt (% of GDP) 108.8 134.5 128.1 122.8 123.8 126.6 129.6 131.8 133.8

Interest Rates (percent; period average)

Fed funds rate 2.2 0.4 0.1 1.5 3.8 3.5 2.7 2.4 2.4

Three-month Treasury bill rate 2.1 0.4 0.0 1.8 3.8 3.5 2.7 2.3 2.3

Ten-year government bond rate 2.1 0.9 1.4 3.1 4.1 3.9 3.5 3.2 3.1

Balance of Payments

Current account balance (% of GDP) -2.1 -3.0 -3.7 -3.8 -3.1 -2.7 -2.4 -2.3 -2.3

Merchandise trade balance (% of GDP) -4.0 -4.4 -4.7 -5.2 -4.7 -4.3 -4.2 -4.1 -4.0

Export volume (NIPA basis, goods) -0.1 -10.2 7.6 2.0 0.8 0.9 2.3 2.4 2.1

Import volume (NIPA basis, goods) 0.5 -5.6 14.6 8.1 -1.2 -0.9 0.8 1.6 1.6

Net International Investment Position (% of GDP) -54.5 -70.4 -78.8 -76.1 -76.2 -76.5 -76.2 -75.6 -75.0
4

Saving and Investment (% of GDP)

Gross national saving 19.4 19.2 20.1 21.5 21.8 21.9 22.1 22.4 22.4

General government -2.9 -11.6 -8.1 -1.3 -1.8 -2.7 -3.5 -3.9 -4.0

Private 22.3 30.8 28.2 22.9 23.7 24.6 25.6 26.2 26.4

Personal 5.8 13.8 9.9 3.7 5.1 6.0 6.5 6.4 6.3

Business 16.5 17.0 18.3 19.2 18.6 18.6 19.1 19.9 20.1

Gross domestic investment 21.4 21.2 21.4 22.5 22.3 22.0 22.1 22.3 22.4

Private 17.9 17.4 17.9 19.2 18.8 18.4 18.4 18.5 18.7

Public 3.5 3.7 3.5 3.4 3.5 3.6 3.7 3.7 3.7

Sources: BEA; BLS; FRB; Haver Analytics; and IMF staff estimates.

1/ Contribution to real GDP growth, percentage points.

2/ Includes staff's adjustments for one-off items, including costs of financial sector support.
UNITED STATES 

STAFF REPORT FOR THE 2022 ARTICLE IV CONSULTATION

KEY ISSUES

The U.S. economy has staged a strong recovery from the COVID-19 shock. The

positive effects of unprecedented policy stimulus, combined with the advantages of a 

highly flexible economy, have been clear. Just over two years after the COVID-19 shock, 

the unemployment rate and other measures of labor force underutilization have 

returned to end-2019 levels and output is close to its pre-pandemic trend. Rapid wage 

increases for lower income workers have reduced income polarization and poverty fell 

in 2020. On net, 8.5 million jobs have been created since the end of 2020. In addition, 

the swift policy response was able to maintain the smooth functioning of U.S. financial 

markets and prevent the surge of bankruptcies that many had feared. 

The rapid rebound has, though, been accompanied by a sharp increase in nominal 

wages and prices. Inflation was initially concentrated in a subset of durable goods as 

strong demand confronted binding supply constraints. However, toward the end of the

summer, price pressures became broad based, affecting a significant slice of the 

consumption basket. Similarly, labor shortages were initially apparent in low skill

occupations, driving up wages for that segment of the labor force. By the fourth 

quarter, though, wage pressures were quickly spreading across the economy as firms 

struggled to fill vacancies and workers switched jobs at an increasing frequency. 

The policy priority must now be to expeditiously slow wage and price growth 

without precipitating a recession. This will be a tricky task. Global supply constraints 

and domestic labor shortages are likely to persist and the Russian invasion of Ukraine is 

creating additional uncertainties. Although fiscal support is being withdrawn, the size 

and timing of the effects of past stimulus—which is expected to continue feeding into 

activity and inflation through a drawdown of household savings—are highly uncertain. 

Returning to price stability will require an assertive withdrawal of monetary 

accommodation. Over the past six months, the Federal Reserve has reacted to shifts in 

incoming data by signaling its intent to pursue a much tighter policy stance. To 

decisively bring inflation back to the Federal Reserve’s 2 percent goal by late 2023/early 

2024 will require both raising the policy rate above neutral, in ex ante real terms, and 

keeping it there for some time. The FOMC’s decision at its June meeting—to raise rates 

by 75 basis points and provide forward guidance around a path for the federal funds 

rate that peaks at close to 4 percent—strikes the right balance. This policy path should 

serve to create the up-front tightening of financial conditions that will be necessary to 

quickly bring inflation back to target. 

June 24, 2022
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2 INTERNATIONAL MONETARY FUND

The FOMC will need to telegraph, well in advance, clear guidance on the path for the policy 

rate to ensure that the withdrawal of monetary accommodation is orderly, methodical, and 

transparent. Communications should continue to underscore that the FOMC’s policy guidance is 

not set in stone but will depend critically on future developments. Changes to strengthen the 

Federal Reserve’s communication tools would carry a high payoff in the current conjuncture, helping 

to ensure that policymakers’ expectations about the likely future path of the policy rate are clearly 

conveyed.

The difficult task of calibrating the response to inflation comes with high stakes. Misjudging 

the policy mix—in either direction—will result in sizable economic costs at home and negative 

spillovers to the global economy. An overly forceful policy response runs the risk of triggering an 

abrupt tightening in financial conditions and a U.S. recession, creating negative spillovers to the 

global economy. An insufficient shift in policies, though, would risk creating a prolonged period of 

high inflation that will necessitate even stronger—and more economically costly—measures in the 

future. In the baseline forecast, the U.S. is expected to slow but to narrowly avoid a recession. 

However, there are material risks that the economy again gets hit by a negative shock which would 

likely turn the slowdown into a short-lived recession.

The inability to pass much of the administration’s reform agenda represents a missed 

opportunity to energize the supply side of the U.S. economy. The economy urgently needs 

lasting changes to release supply-side constraints, raise productivity, support labor force 

participation, and incentivize investment and innovation. The slowing economy and rising inflation 

also further strengthen the longstanding case for a better social safety net. Policymakers should 

continue to make the case for changes to tax, spending, and other areas (including immigration 

policy) to boost aggregate supply and support the poor. Policy proposals should be pragmatically 

adapted, as needed, to garner political support. 

More determined action is needed to achieve the administration’s climate goals and to 

facilitate a smooth, speedy transition to a low carbon economy. In the absence of legislative 

approval of the climate provisions in the Build Back Better plan, the current reliance on regulatory 

and executive actions appears insufficient to incentivize the transition to a low carbon economic 

model. A more effective strategy would include broad-based pricing of carbon and other pollutants, 

sectoral feebates, regulatory restraints on emissions, the elimination of subsidies for fossil fuels and 

carbon-intensive agriculture, and a reprioritization of public spending toward mitigation and 

adaptation goals. Past experience with large scale structural changes in the U.S. economy has made 

clear that, while such changes can generate aggregate benefits, they can also impose costs on a 

large part of the population. If the shift to a low carbon economic model is to be successful and 

receive societal support, it will need to embed—right from the start—policies that help lessen

rigidities in reallocating factors of production across sectors and regions; ensure the right human 

capital is available to meet the demands of a low carbon economy; and meaningfully support those 

who bear a disproportionate share of the burden of adjustment. 
UNITED STATES

INTERNATIONAL MONETARY FUND 3

Approved By

Nigel Chalk (WHD) 

and Jeromin 

Zettelmeyer (SPR)

Discussions were held with non-government counterparts in Texas, 

New York, and Washington during April and May 2022 and with 

government agencies from May 31–June 15, 2022. The team 

comprised Nigel Chalk (head), Laila Azoor, Katharina Bergant, Moya 

Chin, Andrew Hodge, Li Lin, Rui Mano, Andrea Medici, Anke Weber 

(WHD), Martin Stuermer (RES), Mico Mrkaic and Elizabeth Van 

Heuvelen (SPR). Concluding meetings were held with Chair Powell and 

Secretary Yellen on June 23–24, 2022.

CONTENTS

ACHIEVEMENTS AND CHALLENGES _____________________________________________________________5

OUTLOOK AND RISKS __________________________________________________________________________ 11

REDUCING WAGE AND PRICE PRESSURES ____________________________________________________ 13

ENERGIZING SUPPLY SIDE SOLUTIONS _______________________________________________________ 24

TRANSITIONING TO A LOW CARBON MODEL ________________________________________________ 28

GOVERNANCE AND TRANSPARENCY _________________________________________________________ 31

STAFF APPRAISAL ______________________________________________________________________________ 32

BOXES

1. U.S. Sanctions on Russia and Belarus __________________________________________________________ 10

2. The U.S. Oil Sector’s Reaction to the Global Price Shock ______________________________________ 12

3. Prospects for a Wage-Price Spiral _____________________________________________________________ 19

4. Monetary Policy Paths to Return Inflation to Target___________________________________________ 20

5. Monetary Policy and Labor Market Power_____________________________________________________ 21

6. Evidence on the Effects of Balance Sheet Reduction __________________________________________ 22

7. Monetary Policy and the Growth of Non-Bank Finance _______________________________________ 23

8. From Polluting to Green Jobs—A Seamless Transition? _______________________________________ 30

FIGURE

1. Two Scenarios for the Path of the Federal Funds Rate ________________________________________ 17

TABLES

1. Selected Economic Indicators _________________________________________________________________ 35

2. Balance of Payments __________________________________________________________________________ 36

3. Federal and General Government Finances____________________________________________________ 37

4. Core Financial Soundness Indicators for Deposit Takers ______________________________________ 38
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4 INTERNATIONAL MONETARY FUND

APPENDICES

I. Risk Assessment Matrix ________________________________________________________________________ 39

II. Sovereign Risk and Debt Sustainability Assessment ___________________________________________ 41

III. External Sector Assessment ___________________________________________________________________ 48

IV. Implementation of 2020 FSAP Recommendations____________________________________________ 49
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INTERNATIONAL MONETARY FUND 5

ACHIEVEMENTS AND CHALLENGES

1. The U.S. vaccination campaign was rolled out quickly and has secured broad coverage. 

Of the eligible population, 71 percent have been fully vaccinated and around one half have received

a booster shot. Vaccination coverage for the elderly has been significantly higher. As a result, 

COVID-19 hospitalization and mortality have fallen markedly. This, in turn, has allowed a rollback of 

many of the public health interventions that were put in place to protect the population. 

Nonetheless, the U.S. has now passed a tragic landmark of 1 million dead from COVID-19 and daily 

deaths remain in the hundreds, concentrated among older, unvaccinated or unboosted Americans.

2. Supported by extraordinary monetary and fiscal stimulus, there has been a strong

recovery in activity. Within 24 months of the COVID-19 shock, the unemployment rate and other

measures of labor force underutilization have 

returned to end-2019 levels and output is close

to its pre-pandemic trend. However, there has 

been a slower recovery of labor force 

participation, mainly reflecting the secular,

demographic downtrend to participation and

early retirements catalyzed by the pandemic. 

There are also important concerns around the 

potential longer run impacts of the pandemic 

on education outcomes (that have been borne 

disproportionately by lower income families). 

3. After more than a decade of below-target inflation, the rapid depletion of slack and

ongoing global supply disruptions have led to a significant acceleration in wage and price 

inflation. In the early part of 2021, inflation was driven by large price increases in a relatively narrow 

set of durable goods. This supported a conclusion at 

the time that inflation would dissipate once 

consumer demand patterns normalized and supply 

problems were overcome. However, during the last 

few months of 2021, the U.S. economy appeared to 

hit a “speed limit” and price pressures both 

intensified and broadened. While the cumulative 

price increase seen in this recovery has been less 

than in past expansions, the reduction in 

unemployment and the upswing in inflation have

both happened at a far faster pace than in previous 

cycles. 

4. Median PCE inflation continues to rise, underlining the broad-based nature of price 

pressures. Over the past few months, the dynamics of inflation has changed with declining durable 

goods inflation largely offset by an acceleration in shelter, healthcare and other services inflation.
UNITED STATES

6 INTERNATIONAL MONETARY FUND

This has mirrored the gradual shift back in 

consumer demand from durable goods toward 

services. Rapidly rising food and energy prices—

fueled by the Russian invasion of Ukraine—have 

further added to headline inflation. Longer-run 

measures of inflation expectations have started to 

drift higher, although generally remain close to 

the Federal Reserve’s medium-term goal. Over a 

shorter horizon, inflation expectations have 

increased significantly.

Sources: BEA, Federal Reserve, Haver Analytics, University of Michigan, Consensus Economics, Blue Chip, and IMF staff calculations.

5. As the pandemic unfolded, policy interventions were successful in temporarily 

offsetting the pandemic’s impact on poorer households. Despite the dislocations associated with

the pandemic, poverty—as measured by the Census Bureau’s supplemental poverty measure

(SPM)—fell to 9.1 percent in 2020 (from 11.8 percent in 2019). There were even larger poverty 

reductions for female-headed households, children, African Americans, and Hispanics. This outturn

demonstrates the effectiveness of the initial policy 

response—stimulus checks, tax credits, 

unemployment benefits, loan, rent and eviction 

moratoria, and food assistance—in alleviating 

poverty. However, the poor targeting of some of 

these support measures added to household 

savings. The drawdown of those savings is now 

bolstering very strong domestic demand, making 

disinflation more challenging. Also, the expiration of

policy interventions and acceleration of inflation

likely mean that much of the reduction in poverty in 

2020 has now been reversed.
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INTERNATIONAL MONETARY FUND 7

6. Fiscal consolidation is underway as

pandemic support is wound down. During the 

pandemic the overall general government deficit 

rose by close to 9 percent of GDP. The US$1.9 

trillion American Rescue Plan—passed in March 

2021—slowed the pace of fiscal contraction in 

2021-22 but did not forestall it.

1 Public debt

increased markedly as a result of the pandemic and 

is expected to continue to rise as a share of GDP

over the medium term (as aging-related 

expenditures on healthcare and social security feed 

into the debt dynamics). 

7. Over the past two years, financial institutions and corporates have been resilient, 

albeit with the aid of significant policy support. Efforts to provide breathing space to small 

businesses (notably through the paycheck protection program), to stabilize funding markets, and to 

inject liquidity into the financial system were effective in sustaining intermediation and preventing 

bankruptcies. Stress tests show the banks to be very liquid and highly capitalized, even in the face of 

a severe combination of shocks. The extraordinary policy support of the past few years has, though, 

created financial stability side-effects. The main vulnerabilities arise from:

• A substantial shift in the monetary stance and the

uncertainties generated by the Russian invasion 

of Ukraine have caused financial conditions to 

rapidly tighten over the past several months. 

Despite this tightening, financial conditions 

remain fairly accommodative. 

• Corporate leverage remains close to the high 

levels seen prior to the pandemic. Risks are, 

though, somewhat mitigated by sizable (and 

increasing) corporate cash buffers, a lengthening 

in the duration of corporate debt, and generally healthy interest coverage ratios. There is, 

though, significant heterogeneity across both sectors and firms which could mean that pockets 

of corporate stress will be revealed in the event that financial conditions tighten by more than is 

currently expected. Also, available data is predominantly focused on publicly traded firms so 

there is less of a clear picture for privately-held companies (although indicators of credit quality 

for smaller firms have improved).

1 For an assessment of the American Rescue Plan, see the 2021 Article IV Consultation. 
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8 INTERNATIONAL MONETARY FUND

• At various conjunctures over the last few years fixed income markets have proven insufficiently 

resilient under stress.2 Standing repo facilities have been established to support liquidity for 

both primary dealers and foreign reserve managers. However, there is an ongoing risk that the 

smooth functioning of key money, repo, and Treasury markets is overly reliant on the 

unprecedented level of liquidity currently sitting in the system. In addition, prime and taxexempt money market funds (as well as dollar-denominated offshore funds) remain subject to 

runs. In addition, some bond funds maintain significant holdings of illiquid assets. The 

interaction between these market and institutional fragilities has the potential to exacerbate 

market functioning problems, if the system were to come under stress.

• Leverage among hedge funds and life insurance companies is high, life insurers have decreased 

their holdings of liquid assets and are more reliant on short term funding, and the issuance of 

securitized instruments—particularly those linked to auto loans—has risen. 

• The digital assets sector has grown rapidly. The recent bout of selling pressures highlights the 

fragility, and in some cases, opacity of this asset class. Several prominent stablecoins are 

marketed as being convertible to U.S. dollars even though they are backed by assets that are 

illiquid or may lose value during market stress. Such par value claims are, therefore, vulnerable 

to run risk. Indeed, some stablecoin providers have recently seen large redemptions which have

prevented them from maintaining their peg to the U.S. dollar. Furthermore, other crypto-assets

have been experiencing significant price volatility, creating uncertain ripple effects through the 

financial system (although these are not, at this stage, viewed as systemic).

3

• The housing market has been on a steep upward trajectory. Nationwide, average prices are 38

percent above where they were at end-2019 and prices are relatively high as a share of both 

rents and household income. Leverage, though, has been contained by relatively low loan-tovalue ratios and conservative underwriting standards (a legacy of the post-financial crisis 

2 Notably during the diminished liquidity of Treasury markets in February 2021, the market dysfunction in the initial 

weeks of the pandemic, the September 2019 surge in money market rates, and the 2014 bond market flash rally.

3 See GFSR, “The Crypto Ecosystem and Financial Stability Challenges”, October 2021.
UNITED STATES

INTERNATIONAL MONETARY FUND 9

reforms). In addition, refinancing activity over the past few years has reduced average mortgage 

payments to all-time lows as a share of disposable income. As such, financial stability risks 

emanating from the housing market appear to be contained. However, there are important 

social concerns linked to the worsening in housing affordability, particularly for lower income 

households.

Despite the proven resilience of the U.S. system over the past several years, the financial stability 

vulnerabilities described may become more salient in the context of the ongoing tightening of 

financial conditions alongside slowing activity.

8. A range of FSAP recommendations remain unaddressed. These include: (i) ensuring each 

Financial Stability Oversight Council member has an explicit financial stability objective in their 

mandate; (ii) closing a range of data gaps; (iii) finalizing the arrangements for market-wide circuit 

breakers and providing greater budgetary autonomy for the SEC and CFTC; (iv) reviewing prudential 

requirements for non-internationally active banks (category III and IV) to ensure they remain

consistent with the Basel framework; (v) strengthening the consistency of risk management practices 

by central counterparties; (vi) subjecting mutual funds to SEC-led liquidity stress tests; and (vii) 

developing a consolidated group capital requirement for insurance companies. There is scope, also, 

to deploy a range of macroprudential tools to improve financial system resilience.

4

9. Authorities’ views. Alongside the increase in economic uncertainty associated with the 

Russian invasion of Ukraine, the past several months have seen large fluctuations in asset prices and 

a tightening of financial conditions. On the whole, measures of market liquidity have worsened 

during this period, in line with the increased volatility in the price of the underlying assets. However, 

under the circumstances, markets have generally functioned well and key funding markets have 

been resilient. Households and businesses have decreased their borrowing as a share of GDP and 

interest coverage ratios have improved. Nonetheless, a slowing economy and more costly financing 

may reveal strains in the ability of some entities to service their debt. Banks have maintained capital 

ratios well above regulatory minima and are very liquid, with less reliance on wholesale funding. 

Some “stablecoins” remain prone to run risk. Substantial work is underway to strengthen the 

collection of data in a range of areas (including on the activities of hedge funds, uncleared bilateral 

repos, and the liquidity and redemption features of open-end funds) and to improve the resilience 

of money market funds.

10. In response to Russia’s invasion of Ukraine, and in coordination with a number of 

other countries, the U.S. has imposed a range of sanctions on Russia and Belarus (Box 1). As 

noted in the April WEO, the ongoing Russian invasion of Ukraine and the sanctions on Russia and 

Belarus are expected to reduce global growth in 2022, increase commodity prices, and disrupt trade 

and financial linkages. Also, as indicated in the April GFSR, the war and related sanctions will test the 

resilience of the financial system, including through direct and indirect exposures of banks and 

nonbanks, market disruptions in commodity markets, increases in counterparty risk, the acceleration 

of cryptoization, and possible cyber-related events.

4 https://www.elibrary-areaer.imf.org/Macroprudential/Pages/Home.aspx
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Box 1. U.S. Sanctions on Russia and Belarus

Since February, the U.S. and over 30 other countries have imposed economic sanctions and export-controls 

on a large number of Russian and Belarussian individuals, companies, and financial institutions.

1 Measures 

include:

• Asset freezes/financing restrictions for designated entities. U.S. persons are prohibited from 

engaging in transactions with the Central Bank, the National Wealth Fund, and the Ministry of Finance of 

the Russian Federation. The U.S. has also imposed a prohibition of transactions by U.S. persons new 

debt with a maturity of greater than 14 days or new equity of certain Russian state-owned enterprises 

and entities that operate in the financial services sector of the Russian Federation. .

• New additions to specially designated nationals (SDNs) and Blocked Persons list. U.S. persons are 

prohibited from dealing with SDNs or assets belonging to SDNs. Accordingly, any assets belonging to

SDNs within the U.S. or that come within the possession of a U.S. person must be blocked. Targeted 

Russian and Belarusian entities include major financial institutions, state owned entities in the bitcoin 

mining industry, companies in key Russian or Belarusian sectors, and key Russian or Belarusian

government officials and individuals that have close ties to the government. Entities owned directly or 

indirectly, 50 percent or more, by one or more blocked persons are also blocked. 

• Import restrictions. Imports to the U.S. of Russian petroleum, natural gas and coal products and certain 

other Russian-origin goods (seafood, alcoholic beverages, non-industrial diamonds) are prohibited.

• Export restrictions. Restrictions on U.S. exports to Russia or Belarus apply to a wide range of goods, 

software and technology (with some limited license exceptions available). These restrictions apply to reexports to Russia or Belarus of U.S. items from third countries, exports to Russia and Belarus of foreignmade items containing more than de minimis levels of U.S. content, and exports to Russia or Belarus of 

certain foreign-made items that are the “direct product” of U.S. technology. U.S. persons are prohibited 

from exporting, re-exporting, selling, or supplying, directly or indirectly, accounting, management 

consulting, or trust and corporate formation services. There is a ban on the export, sale, supply (directly 

or indirectly) of U.S. dollar denominated banknotes to the Russian government or any person located in 

Russia.

• Investment restrictions. New investments from the U.S. or by a U.S. person, wherever located, in any 

sector of the Russian economy are prohibited.

• Airspace and port closures. All Russian air carriers, commercial operators and Russian-owned aircraft 

are banned from operating to, from, or within the U.S. territorial airspace (with some exceptions, e.g., for 

emergencies, certain diplomatic operations). Russian-affiliated vessels are prohibited from entering U.S. 

ports.

The U.S. has also issued General Licenses authorizing U.S. persons to engage in certain activities that would 

otherwise be prohibited by these sanctions (such as the export or re-export of agricultural commodities, 

medicine, or medical devices).

Some of these measures constitute capital flow management measures introduced for reasons of national or 

international security.

1 Executive Orders (EO) 14024, 14038, 14066, 14068, 14071. Directives 1–4 issued under EO 13662 in response to Russia’s 

invasion and occupation of Crimea in 2014 are still in force. Department of Commerce (Bureau of Industry and Security),

15 CFR Part 744.

11. The 2021 external position remains moderately weaker than the level implied by 

medium-term fundamentals and desirable policies. The current account deficit rose over the past 
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two years as the composition of consumer demand shifted away from services to tradeable goods, a 

huge fiscal stimulus was put in place, and the U.S. recovered faster than its trading partners. This left 

the current account deficit below its medium-term norm. The current account in 2022 is expected to 

be broadly similar to 2021 levels but the real exchange rate is now around 5 percent more 

appreciated than in 2021 (potentially adding to future imbalances in the U.S. external position).

OUTLOOK AND RISKS

12. Despite a range of positive outcomes, many of the downside risks highlighted at the 

time of the 2021 Article IV have now been realized. Congress did find common ground to pass

an infrastructure package in November but was unable to legislate the broader tax and spending 

package that was proposed by the administration. This will modestly lower near-term growth 

prospects but, more saliently, will forego the positive supply-side benefits that many of these 

measures were expected to generate. Supply chain constraints have been more persistent than had 

been expected a year ago and there are now new concerns linked to the Russian invasion of Ukraine 

and Chinese lockdowns. Most saliently though, a broad-based surge in inflation—that was viewed as 

the leading economic risk at the time of the 2021 Article IV—has become a reality, posing systemic 

risks to both the U.S. and the global economy.

13. The strong underlying momentum in the U.S. 

economy is expected to wane over the next two years. 

In the near-term, consumption will remain the driver of 

growth as household savings are drawn down and the 

effects of the pandemic dissipate.

5 In addition, binding 

capacity constraints and the ongoing reshaping of the U.S. 

economy are expected to support continued capital 

formation, particularly in intellectual property. There is, 

though, considerable uncertainty over the net impact of 

higher oil prices on consumption and investment (Box 2). In addition, the withdrawal of fiscal and 

monetary support is expected to increasingly weigh on activity. All in all, growth is expected to fall 

to 0.7 percent q4/q4 by end-2023 and then pick up gradually into 2024. The U.S. is expected to 

narrowly avoid a recession. Nonetheless, the risk of the economy “stalling” and tipping into a shortlived downturn are significant. In particular, if the economy again gets hit by a negative shock, the 

predicted slowdown will likely turn into a short-lived recession. PCE inflation is expected to fall 

steadily as activity decelerates and supply-demand imbalances are resolved, reaching 2 percent on a 

year-on-year basis by end-2023.

14. The main downside risk is an abrupt tightening in financial conditions (Appendix I). The 

most likely source of such a tightening would be if there were continued upside surprises to 

inflation. This could arise from an escalation of the Ukraine war, China shutdowns, a shift in inflation 

5 The overhang of household savings accumulated during the pandemic is estimated to be equivalent to around 14 

percent of annual consumption. 
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expectations (a risk that becomes larger the longer that realized inflation stays high), an acceleration 

in nominal wage demands, and/or greater-than-expected inertia in realized inflation. If inflation 

does surprise to the upside, this would shift market views on the likely path for the federal funds 

rate (i.e., to a path that is well above that signaled by the FOMC in its June meeting) which would 

have implications for a range of asset valuations. Such a tightening of financial conditions would 

impose a larger drag on U.S. activity but also have important global spillovers. A resurgence of 

COVID-19 at home or abroad represents an additional, salient downside risk to the outlook.

Box 2. The U.S. Oil Sector’s Reaction to the Global Price Shock

Increased private investment in U.S. oil and gas has the potential to provide some relief to tight 

energy markets. The dominant type of production in the U.S. (hydraulic fracturing) can be ramped up faster 

than elsewhere. Typically, a 10 percent increase in oil and gas prices adds around 2.5 percent to U.S. oil and 

gas investment in the first year and a cumulative 5 percent after two years. Since the lead time from 

investment to production is roughly 6 months for shale oil and gas, these investments have the potential to

quickly translate into higher energy output.

However, capital expenditure is lagging past 

responses to higher prices. Industry contacts expect 

capital spending to grow around 5–10 percent in 2022 

and 2023 (an increase that has been largely unchanged

after the Russian invasion of Ukraine). There are similarly 

modest changes in oil production forecasts. 

Having gone through several booms and busts, the 

industry’s business plans are constrained by investors’

unwillingness to increase leverage or scale back 

dividend payouts to fund new projects. This is despite

current prices being well above break-even costs for most 

wells. As a result, public companies are typically re-investing only 30–50 percent of their free cash flow into 

new projects. Shortages of labor and equipment (e.g., steel pipes) have exacerbated cost inflation and 

delayed some projects. Constraints on the availability of capital due to Environmental, Social, and 

Governance standards may also play a role. 

Natural gas exports are especially capacity 

constrained. LNG terminal projects require long-term 

take-or-pay commitments from buyers. However, 

European buyers are reluctant to make such 

commitments due to cost considerations and the 

uncertain pace of the transition to low carbon energy 

sources. Even with contracts in place, and with

expedited approval and construction, it would take 2 

or more years for a new terminal to come online. 

Insufficient gas pipeline capacity may be a further 

binding constraint over the short term (especially in 

the Appalachian Basin). Despite these challenges, LNG 

export capacity is expected to grow by 18 percent this 

year and could possibly double by 2030 (based on 

already-approved terminal projects).
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15. Authorities’ views. In part thanks to the administration’s strong response to the COVID 

shock, the U.S. recovery has been remarkably fast with a quick return to full employment. However, 

inflation has surprised on the upside over the past year and is expected to remain high in the near 

future. A dissipation of supply chain constraints, a steady increase in labor force participation, and a 

slowdown in demand (as financial conditions tighten and monetary and fiscal support are 

withdrawn) should facilitate a steady reduction in price pressures. Healthy balance sheets and the 

strong growth momentum already in place are expected to help maintain a strong labor market 

during this period of disinflation. Key risks include a slower decline in inflationary pressures, 

uncertainties related to the Russian invasion of Ukraine, and a possible resurgence of new COVID 

variants.

REDUCING WAGE AND PRICE PRESSURES

16. Taking the steam out of wage and price inflation without precipitating a recession is 

the principal near-term challenge facing U.S. policymakers. The latest data on inflation reveals 

sustained and broad-based pressures. More worryingly, shelter, healthcare and other service

inflation have picked up and are likely to take time to bring down. The last time that policy had to 

contend with a material acceleration in inflation was in the 1980s, a period when both the structure 

of the U.S. economy and the framework for monetary policy were markedly different. As a result, 

past episodes may not provide a useful guide in navigating the current conjuncture. The uncertain 

and ongoing structural shifts in labor markets and the broader economy that were catalyzed by 

COVID-19 further complicate the situation. 

17. The speed at which nominal wages took off in the last few months of 2021 has been 

impressive. At the forefront was a rapid expansion in the demand for workers which far outpaced 

the bounce back in labor supply. This led to an acceleration in wages that was faster than had been 

seen since the early-1980s and exceeded the wage increases seen in many other advanced 

economies. Part of the slow recovery in the labor supply reflects a demographic trend (as the share 

of older workers—who tend to participate less in the labor force—rises). The increase in wages and 

the broad availability of jobs should help boost labor supply. Despite this, the continuing recovery in 

participation is expected to be a protracted process, especially when compared to other advanced 

economies.

6

18. In contrast to past U.S. recoveries, the most rapid wage increases have been incident 

on lower income workers. Prior to the pandemic, wage growth was consistently higher for those 

with a college education. However, since 2020, this differential is no longer apparent in the data.7

Similarly, the nominal wages of the lowest two deciles of the income distribution are now 12 percent 

above pre-pandemic levels (the wage for the median worker is only 10 percent higher). This 

6 See R. Duval, Y. Ji, L. Li, M. Oikonomou, C. Pizzinellli, I. Shibata, A. Sozzi and M. Tavares “Labor Market Tightness in 

Advanced Economies”, International Monetary Fund Staff Discussion Note, 2022.

7 A panel regression drawing on household data and controlling for demographics, region, industry, and union 

membership shows education to no longer being a significant determinant of real wage growth after 2020. 
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reduction in wage polarization has been seen also in a significant decline in the share of households 

earning less than half the median wage. It is, unclear, though, to what extent this reduction in wage 

polarization will be sustained.

Sources: Current Population Survey, Federal Reserve of Atlanta, and IMF staff calculations.

19. The ongoing reallocation of workers has 

added to the upswing in nominal wages. The 

pandemic prompted a massive reshuffling of 

workers across industries, occupations and 

geographies, which is still playing out. The “churn” 

is most clearly captured by the continuing increase 

in the number of job-to-job transitions (which now 

exceed pre-pandemic levels). One of the side 

effects of this worker reallocation has been very 

high rates of quits, openings, and hiring. Notably, 

the vacancies to unemployment ratio is at the 

highest level since 2000 when the JOLTS data was first compiled. This increase in openings and quits 

has been most visible for leisure and hospitality services but other sectors have also seen a 

Sources: BLS and Federal Reserve Bank of Atlanta. Source: OECD.
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meaningful increase. The greater labor market dynamism that followed the pandemic has 

strengthened worker bargaining power and put upward pressure on wages (both for those who 

remain in the same job and, especially, for those workers who choose to switch employers).

Sources: Current Population Survey, BLS, Haver Analytics, and IMF staff calculations.

20. The acceleration in nominal wages was accompanied by a broadening of price 

pressures. This is most clearly highlighted by the growth of median PCE inflation that overlapped 

with the rise in median wages at the end of 2021. Despite these moves being contemporaneous, the 

regional and sectoral data suggests that the two-way feedback between wages and prices has been

relatively weak and is likely to unfold over a longer horizon (Box 3). It is also worth noting that the 

rise in median inflation in other advanced economies has followed a broadly similar path to that in 

the U.S.

21. Contending with these wage and price pressures will require a rapid withdrawal of

monetary accommodation. Given the broad-based nature of wage and price inflation, a range of 

model simulations indicate that quickly bringing inflation back to 2 percent requires an increase in 

the ex-ante real policy rate to above neutral (Box 4). There is also some evidence to suggest that a

secular increase in market concentration among U.S. corporates may dampen the transmission of 

monetary tightening, requiring a more decisive cooling of labor markets to stabilize the system (Box 
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5). Staff’s baseline forecast is predicated on the median projection for the federal funds rate 

published at the June FOMC meeting. That rate path would push the ex ante real policy rate above 

zero by late-2022 and is expected to bring inflation back to 2 percent by late 2023/early 2024.

However, if there is more inertia in wage and price inflation than is currently envisaged, a tighter 

policy stance will be needed to bring inflation back to target. This would lead to a more pronounced 

increase in unemployment and a short recession (Figure 1). 

22. In addition to adopting a more front-loaded rate path, the Federal Reserve’s balance 

sheet should be quickly pared back (as was communicated in the May FOMC meeting). 

However, the empirical evidence suggests that balance sheet run-off is likely to have a relatively 

small impact on monetary conditions (Box 6). As such, changes in the federal funds rate will need to 

continue to be the primary tool for policy.

23. The effective communication of policy intentions will help keep medium-term 

inflation expectations anchored and bring inflation back to target. To strengthen the 

communications toolkit, the Federal Reserve could begin publishing, at each policy meeting, an 

internally-consistent economic projection and rate path—produced by Fed staff and potentially 

endorsed (or otherwise recognized) by the FOMC. This central forecast should be supplemented 

with a few alternate, quantified scenarios to show the range of views on the FOMC and the 

distribution of risks around the baseline. This would be preferable to the current reliance on the 

quarterly Summary of Economic Projections to convey FOMC members’ policy expectations. Putting 

in place such a communications device would help ensure that policymakers’ expectations about the 

likely future path for the policy rate are clearly conveyed and, in so doing, would strengthen the 

impact of forward guidance. The Federal Reserve could also usefully clarify in its Statement on 

Longer-Run Goals and Monetary Policy Strategy how the policy framework applies in an 

environment where inflation has moved well above two percent.

24. Bringing down inflation poses important macro and financial stability risks. Coupled 

with the pullback of fiscal stimulus, the envisioned withdrawal of monetary accommodation will 

further tighten financial conditions and restrain demand. A clear communication of policy 

intentions—particularly by the Federal Reserve—will help reduce the possibility that this shift in 

financial conditions is abrupt or disruptive. However, even with effective communications, a smooth 

transition back to lower inflation is by no means assured. Monetary policy will have to contend with 

a complex transmission of policy to financial and macroeconomic outcomes, including through the 

nonbanks (Box 7). Policymakers also face significant ongoing uncertainties related to the pandemic, 

China lockdowns, and the Russian invasion of Ukraine. This means there is a material chance that the 

needed shift in monetary policy will trigger a contraction in activity and a sizable increase in 

unemployment. Such a scenario would evidently have important negative outward spillovers—both 

through a drop in U.S. demand and a tightening of global financial conditions—that could sideswipe countries, individuals and firms that are leveraged in U.S. dollars and/or that face sizable nearterm funding needs. 

25. Authorities’ views. Inflation remains unacceptably high and bringing down inflation is a top 

priority of the Federal Reserve and the administration. The FOMC has increased its policy rate at its 
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meetings since March and clearly indicated its expectation of ongoing increases in the target range 

for the federal funds rate in the coming FOMC meetings. There is also clarity about the strong 

commitment and determination of policymakers to restore price stability. Given the high degree of 

uncertainty in the pace and timing of disinflation, the Federal Reserve is being data dependent and 

is following an approach that involves expediting the return of the policy rate to neutral or modestly 

restrictive settings and then assessing, later this year, the effects of these policy changes and 

whether or not further policy adjustments are then required. The plan to reduce the Federal 

Reserve’s balance sheet is underway and will help firm the stance of monetary policy. The Federal 

Reserve considers its existing suite of communication tools—including the FOMC statement, press 

conferences after each meeting, the Summary of Economic Projections, minutes of FOMC meetings, 

and periodic speeches by senior officials—as being well understood by market participants and 

effective in aligning market expectations of the policy outlook with the FOMC’s own assessment.

Figure 1. Two Scenarios for the Path of the Federal Funds Rate

Source: IMF staff calculations.

26. Beyond the downside macro risks, it is possible that markets may not smoothly absorb 

higher interest rates and the shrinking of the Fed’s balance sheet. As discussed earlier, there are 
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known shortcomings in the “plumbing” of key Treasury and money markets and certain asset 

management vehicles pose run risks. If such systemic vulnerabilities in market functioning were to 

materialize, the Federal Reserve would face a tricky dilemma in deciding whether or not to inject 

liquidity to restore market functioning at the same time as interest rates are moving higher to 

contain inflation. The introduction of standing facilities for primary dealers and foreign and 

international monetary authorities should help mitigate potential volatility in short-term interest 

rates but more needs to be done (including to reduce the possible stigma associated with the use of 

these facilities). Future changes that should be considered include the introduction of central 

clearing for the Treasury market, modifying the design of the supplementary leverage ratio (to allow 

for an increase in dealer intermediation capacity), moving all money market funds to a floating net 

asset value, considering more binding (and possibly countercyclical) liquid asset requirements, 

subjecting asset management vehicles to an annual liquidity stress test, instituting pre-determined 

arrangements to lock-in a proportion of an investor’s shares in the event of unusual outflows, 

providing for in-kind redemptions to meet withdrawals by institutional investors, and allowing for 

swing pricing or temporary gates on outflows.

27. Authorities’ views. Recent years have seen episodes during which some markets were 

under stress. At the same time, the overall size and flows through key markets have grown 

significantly and are increasingly influenced by the activities of automated trading strategies. During 

the course of 2022, measures of liquidity and market depth in many markets have declined—notably 

in the Treasury market. On the whole, U.S. markets have functioned well in 2022. Furthermore, work 

is underway in hedge funds, open-ended mutual funds, and Treasury and related markets to close 

data gaps and increase the resilience-under-stress of these entities and markets.
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Box 3. Prospects for a Wage-Price Spiral

The evidence suggests a relatively weak feedback loop between wages and retail prices in the U.S. The passthrough from wages to prices has tended to be low and concentrated in services. Furthermore, higher prices 

only partially feed into nominal wage growth, and even then do so with a considerable lag. 

The empirical literature offers limited evidence on the wage and price feedback loop. At the macro 

level, the link between labor cost and price inflation has been declining over the past three decades.1

Analysis using disaggregated data has, however, been relatively scant. Rissman2 finds a weak passthrough of 

wages to inflation and only in the manufacturing and retail sectors. Heise et al.3 find some evidence of 

passthrough from wage growth to producer price inflation in the services sector (but do not examine 

whether this translates also to retail price inflation). 

Sectoral data suggests the acceleration of nominal wages has likely added only modestly to services 

inflation. Input-output matrices were used to construct industry wage costs across 73 sectors and these 

were matched with the same sectoral prices from the personal consumption expenditure index. Following 

the empirical strategy in Heise et al. (2021), panel estimates were then used to estimate the impact of wages

on consumer prices (controlling for sectoral productivity growth and incorporating time and industry fixed 

effects). The results suggest that the passthrough from higher wages to services inflation is only around 13 

percent after five quarters and there is no material passthrough to goods inflation. Restricting the sample to

the post-COVID period suggests, if anything, that the passthrough to services has been smaller over the past 

two years than the historic average. 

A panel regression using monthly data from 23 

metropolitan areas was used to estimate the 

historical passthrough of local-level inflation to local 

nominal wage growth. The regressions control for labor 

market slack, unionization, the share of part-time 

workers, the share of the self-employed, and the share of 

those being paid on an hourly basis. Impulse responses 

suggest that the reaction of nominal wage growth to a 

shock in prices in the same metropolitan area is close to 

zero even after a year. It rises slowly to around one-half 

after 24 months. 

1 Bobeica, E., Ciccarelli, M. and Vansteenkiste, I., 2021, “The Changing Link Between Labor Cost and Price Inflation in the 

United States”. European Central Bank Working Paper, No 2583, August 2021. 

2 Rissman, E., 1995, “Sectoral Wage Growth and Inflation”, Economic Perspectives, Federal Reserve Bank of Chicago. 

3 Heise S., Karahan F., and Sahin A. , 2021, “The Missing Inflation Puzzle: The Role of the Wage-Price Passthrough”, Journal 

of Money, Credit and Banking.
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Box 4. Monetary Policy Paths to Return Inflation to Target

Three different policy paths were simulated in the Fed’s semi-structural FRBUS model. The broader message is, 

to expeditiously return PCE inflation to target, the federal funds rate would need to rise above its neutral level

(calibrated here as 0.5 percent in real ex ante terms) and remain above neutral for at least one year. 

• Average inflation targeting.1 Under this policy rule, the rate path is a function of the deviation of the 

three-year trailing average of inflation from 2 percent and the deviation of output from potential. As 

such, the backward-looking averaging implies a more gradualist approach to bringing down inflation. 

Conditioned on current circumstances, this policy rule would increase the federal funds rate by around 

100bp each year in 2022–24 leading to a relatively slow decline of inflation (reaching two percent in 

2026). Ex ante real rates would remain below neutral until 2024. 

• Optimal control. This policy response maximizes intertemporal welfare (defined as squared deviations 

of unemployment from NAIRU and squared deviations of inflation from the 2 percent target). Also, to 

prevent disruptive jumps in the policy rate, policymakers are assumed to smooth the adjustment in the 

federal funds rate. The optimal path from such a simulation increases policy rates around 300bp by end2023 and a further 1⁄2 percent in 2024. Ex ante real rates rise above the neutral level in 2023 H1, which 

brings inflation back to target in 2024. Such a rate path would lower growth to 1.5 percent in 2025, 

causing unemployment to rise marginally above 4 percent. 

• Stickier expectations formation. With inflation having run very high for the past year or more, nearterm inflation expectations may have already become entrenched at higher levels. To examine the 

implications of this possibility, the optimal policy response is computed after modifying the expectations 

formation process to be more inertial (i.e., that agents expect above-target inflation will persist for 

longer). A more front-loaded path for the federal funds rate is needed, peaking at close to 4 percent.

This returns inflation to target but over a longer timeframe. Unemployment rises above 4 percent in 

early 2024, remaining at 4–41⁄4 percent over the medium term. This implies a higher sacrifice ratio to 

disinflate. The simulations also indicate that the pace of disinflation and optimal rate path depend 

critically on assumed model parameters and, particularly, assumptions about expectations formation. 

1 It is worth noting that the average inflation targeting rule in this box is an IMF staff assumption and does not represent 

the Federal Reserve’s current policy framework. The longer-term goal of the Federal Reserve is to achieve inflation that 

averages 2 percent over time but aims to have inflation moderately above 2 percent only after periods when inflation has 

been running persistently below 2 percent. In addition, policy is designed to react only to shortfalls of employment from 

its maximum level (the policy rule here reacts symmetrically to the output gap).
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Box 5. Monetary Policy and Labor Market Power1

A large panel dataset of 250 million online posting of vacancies was used to capture how employers 

respond to monetary policy shocks2 and whether that reaction depends on the degree of labor market 

monopsony power of the employer (as measured by the vacancies a firm posts relative to the total number 

posted within a specific commuting zone). 

After controlling for commuting zone, firm and time fixed effects, a firm’s degree of market power is 

found to amplify the impact on the number of vacancies posted from changes in monetary policy.

3 To 

give a sense of magnitudes, a firm in the top 5 percent of monopsony power is found, in response to a 

monetary tightening, to decrease its vacancy postings by 30 percent more than a similar firm without such 

labor market power. This amplification effect is found to be even larger for vacancies that do not require a 

college degree or specific technological skills. 

Using the same panel dataset to look at the impact of a monetary policy shock on wages finds there 

to be no significant difference in wage offers based on the firm’s degree of monopsony power. This 

would suggest that the trade-off between labor market tightness and wages is flatter for firms that have 

more purchasing power in local labor markets. The implication is that, all else equal, at higher levels of 

monopsony power a surprise tightening of monetary policy leads to a sharper increase in unemployment 

and more modest effects on wages.

Estimating a wage Phillips curve (at the commuting zone 

level) and allowing the slope of the curve to be based on 

the degree of monopsony power corroborates the idea 

that wages at firms with labor market power are less 

reactive to the degree of slack in local labor markets. In 

commuting zones where employers are smaller and more 

competitive, there appears to be a much steeper relationship 

between wages and unemployment. Wage offers by firms with 

high labor market power, on the other hand, are not 

statistically related to the level of unemployment. From a 

longitudinal perspective, the secular increase in the 

concentration of U.S. corporate system may partially explain 

the flattening trade-off between wage growth and unemployment.

4

1 Burya, A., R. Mano, T. Yannick and A. Weber, 2022, “Monetary Policy Under Labor Market Power,” IMF WP/22/128.

2 We use monetary policy surprise shocks derived by Jarocinski, M. and P. Karadi, 2020, “Deconstructing monetary policy 

surprises—the role of information shocks”, American Economic Journal: Macroeconomics, 12 (2), pp. 1–43.

3 While the panel dataset provides information on vacancies, matching it with data from Compustat on employment finds 

a strong empirical relationship between the two.

4 Galí, J. and L. Gambetti, 2019, “Has the U.S. Wage Phillips Curve Flattened? A Semi-structural Exploration,” NBER 

Working Paper 25476, and Leduc, S. and D. Wilson, 2019, “From NY to LA: A Look at the Wage Phillips Curve Using Cross 

Geographical Data,” 2018 Meeting Papers 1290, Society for Economic Dynamics.
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Box 6. Evidence on the Effects of Balance Sheet Reduction

While there have been extensive studies on the effects of quantitative easing in the U.S., the 

literature on the impact of reducing the central bank’s balance sheets is much less exhaustive.

1

Empirical analysis does suggest, though, that the impact of balance sheet policies is likely to be asymmetric

(which would preclude assuming that the effects of balance sheet run-off is the inverse of effects measured 

during the expansion of the balance sheet). 

Event studies assess that Federal Reserve announcements relating to balance sheet reduction during 

2014–19 had no measurable impact on financial conditions.2 This could be because the pace of balance 

sheet reduction in the last cycle was more gradual than the expansion, because announced policy changes 

were already built into market expectations, and/or because—unlike during the balance sheet expansion—

there was no implied forward guidance on the rate path being attributed to the timing of run-off (Fed 

officials even characterized it as “like watching paint dry”). 

There is some evidence that the actual implementation of the reduction of the balance sheet leads to 

a tightening in financial conditions. This may suggest there is a measurable liquidity effect that increases

the spread between the fed funds rate and the interest paid on excess reserves, and tightens financial 

conditions, as excess reserves decline.

Extrapolating from the effects of balance sheet reduction in 2017‐2019 would suggest potentially 

modest effects on financial markets and macro outcomes as the caps on reinvestments are increased. 

However, there are important differences in the current episode relative to the last balance sheet run-off: the 

monthly pace of balance sheet reduction is much faster; the balance sheet is being reduced from a much 

higher level; the run-off is occurring much sooner in the tightening cycle (only 2 months after the first 

increase in the federal funds rate whereas in the previous cycle it was 2 years after); it is being accompanied 

by a much faster increase in policy rates; and there have been important changes in the Federal Reserve’s 

monetary policy strategy since outcomes-based forward guidance more tightly embedded into the new 

framework (i.e., that the federal funds rate would remain at the effective lower bound until inflation rises to 2 

percent and is on track to moderately exceed 2 percent for some time). These factors could either increase 

or reduce the effects of balance sheet policy and its impact on financial conditions.

1 See Kuttner, K. (2018). “Outside the Box: Unconventional Monetary Policy in the Great Recession and Beyond,” Journal of 

Economic Perspectives, 32(4), 121-46; Dell’Ariccia, G., Rabanal, P. and Sandri, D. (2018). “Unconventional Monetary Policies 

in the Euro Area, Japan, and the United Kingdom,” Journal of Economic Perspectives, 32(4), 147-72.

2 Smith, A. and Valcarcel, V. (2021). “The Financial Market Effects of Unwinding the Federal Reserve's Balance Sheet” 

Federal Reserve Bank of Kansas City Research Working Paper 20-23.
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Box 7. Monetary Policy and the Growth of Non-Bank Finance1

Non-Bank Financial Institutions have grown rapidly in 

recent years. A functional definition of market-based 

finance2 derived from flow of funds data shows substantial 

growth in short and longer-term market-based finance 

(even as securitization activity fell markedly after the 

2008-09 financial crisis and important structural shifts 

took place following reforms to the money market 

industry). 

Based on historical experience, tighter monetary 

policy should be expected to contract credit but also 

lead to a shift in the composition of how that credit is 

intermediated through the non-banks. A Bayesian VAR 

analysis shows that a contractionary monetary policy shock3 initially tends to reduce the growth rate of short 

duration market-based finance. However, after around a year, flows shift back into those nonbank vehicles, 

potentially in order to benefit from lower funding costs and less burdensome regulatory constraints 

(especially relative to banks). On the other hand, credit intermediation by longer term mutual funds, 

insurance and pension funds are found to permanently decline in response to tighter monetary policy. Data 

on flows into long-term mutual funds from the Investment Company Institute corroborates these findings, 

showing that a contractionary monetary policy shock leads to outflows from longer duration nonbank 

finance and reduces the returns earned on both bond and, especially, equity funds.

1 See A. Hodge and A. Weber, “Non-Bank Finance and the Transmission of Monetary Policy”, IMF Working Paper 

(forthcoming). 

2 See Gallin (2013), "Shadow Banking and the Funding of the Nonfinancial Sector," Finance and Economics Discussion 

Series 50, Board of Governors of the Federal Reserve System. One potential caveat to these measures relates to potential 

data gaps in flow-of funds statistics (see IMF WP18/62).

3 Monetary shocks are from Jarocinski and Karadi, (2020), “Deconstructing Monetary Policy Surprises—the Role of 

Information Shocks”, American Economic Journal: Macroeconomics, 12 (2), pp. 1–43.
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24 INTERNATIONAL MONETARY FUND

ENERGIZING SUPPLY SIDE SOLUTIONS

28. The Infrastructure Investment and Jobs Act, which was signed into law in November,

was an important step forward in addressing supply-side constraints to growth. The legislation 

increased public capital spending by 2.3 percent of 2022 GDP, spread over the next 10 years. The 

appropriation included resources to improve roads, public transit, ports, airports and waterways;

expand access to clean water and broadband; improve the electricity grid; and start to build out an 

electric vehicle charging network. By removing bottlenecks and expanding capacity, these 

investments are expected, over the medium term, to add to the productive capacity of the economy. 

However, more infrastructure spending will likely be needed in the coming years to fill the 

infrastructure gap (which was estimated in 2021 by the American Society of Civil Engineers at over 

10 percent of 2022 GDP), bring the overall quality of U.S. public infrastructure to the level of other 

industrialized economies, and ensure the existing public capital stock is well maintained and resilient 

to the effects of climate change.

29. Despite progress on infrastructure, the inability to pass the rest of the administration’s 

reform agenda represents a missed opportunity to energize the supply side of the U.S. 

economy. In particular, policies that are able to release supply side constraints, raise productivity, 

and incentivize labor force participation would command a particular premium at this juncture. The

U.S. has the fiscal space to make these changes and they would represent multi-year commitments

that have relatively small implications for total spending (less than 0.5 percent of GDP per year). The 

near-term implications for the fiscal deficit and debt should, nonetheless, be offset through tax 

measures in order to avoid adding to near-term demand pressures. Such policies include:

• Subsidies or tax credits to defray the cost of childcare and allow parents with young children to 

return to the workforce.8

• Increasing the generosity, and expanding the coverage, of the earned income tax credit which

creates an important incentive to work for lower income households.9

• Providing paid family leave to help increase female attachment to the labor force and raise 

participation.

10 The evidence also suggests such leave can lead to better health outcomes, less 

poverty, and improved economic security.

• Removing “cliffs” in social benefits so as not to disincentivize labor supply as a result of the loss 

of social assistance as incomes rise.

11

8 See G. Whitehurst, “Why the Federal Government Should Subsidize Childcare and How to Pay for It”, Brookings 

Economic Studies, 2017.

9 See B. Meyer, “The Effects of the Earned Income Tax Credit and Recent Reforms”, Tax Policy and the Economy, 2010.

10 For a survey of the literature, see Congressional Research Service, “Paid Family and Medical Leave in the United 

States”, February 2020.

11 See “Reframing Benefits Cliffs: Solutions for an Inclusive Recovery”, Federal Reserve Bank of Atlanta, 2020 or 

“Addressing Benefits Cliffs”, National Conference of State Legislatures, 2019.
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• Increase access to healthcare, higher education, and vocational training—particularly for lower 

income groups—in order to raise human capital, close skills gaps, and improve productivity. 

• Reforming the existing immigration system to 

increase the net inflow of workers and ensure 

the right supply of skills in the U.S. labor force, 

particularly given ongoing shifts in the structure 

of the economy. Since 2016, the inflow of 

permanent residents has fallen markedly,

contributing to a decline in the growth of both 

the population and labor force. This fall was 

further deepened by the onset of the pandemic.

30. As discussed in the 2021 Article IV, there is scope to increase the corporate tax rate 

and raise the tax burden on higher income households and pass-throughs. There are also 

significant loopholes in the tax code that are both inequitable and distortionary (including “step-up 

basis” that allows the wealthy to avoid capital gains tax and “carried interest” that incentivizes high 

earners to recharacterize their labor income to obtain a lower tax rate). Reducing the minimum 

threshold for the estate tax (from the current US$23.4 million for a married couple) is warranted. 

Finally, it will be important to legislate the globally coordinated agreement on a minimum corporate 

tax so as to counter profit shifting and base erosion. Doing so will be beneficial to the U.S. but will 

also have positive spillovers to the global system as a whole. Unfortunately, there appears to 

currently be little appetite in Congress to legislate such improvements in the U.S. tax code.

31. Authorities’ views. The administration’s priorities remain to rebuild U.S. infrastructure, 

combat the climate crisis, and lay a new foundation for longer run growth. The Infrastructure 

Investment and Jobs Act represents a once-in-a-generation investment to build a better America, 

create well-paid union jobs, and underpin sustainable growth. In implementing the law, a particular 

focus has been on ensuring traditionally underserved communities have equitable access to the 

benefits that these investments generate. The administration remains committed to expanding the 

productive capacity of the economy while at the same time reducing the fiscal deficit. Priorities 

include cutting prescription drug costs, investing in child and elderly care, expanding access to 

higher education including by providing tuition-free community college, providing health coverage 

to the uninsured, and instituting paid family and medical leave. These initiatives could be fully paid 

for through an increase in the corporate income tax and by ensuring the wealthiest Americans pay 

their fair share in taxes (including by increasing taxes on their capital income and closing a range of 

loopholes). The administration is fully committed to implementing the global agreement on new 

international corporate tax rules that included a global minimum tax. The administration is also 

committed to modernizing the U.S. immigration system while strengthening border controls 

through technology and better infrastructure at the ports of entry.

32. The administration should institute permanent improvements in the safety net to help

poor families who are currently facing rising energy, transport, shelter, and food costs. This 

could include permanently expanding the availability of food assistance for poorer households (e.g., 
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through the Supplemental Nutrition Assistance Program and other federal food programs targeted 

at families with children). At the state level, consideration could be given to deploying some of the 

un-used federal transfers from the American Rescue Plan to improve safety net programs (like 

Temporary Assistance for Needy Families and Medicaid). Also, given the demonstrated positive 

effects on low-income households from the policies in the American Rescue Plan, a more narrowly 

targeted (i.e., available to the bottom 2 or 3 deciles of the income distribution), refundable Child Tax 

Credit12 should be made permanent. The now-expired expansion of the Earned Income Tax Credit

should also be reinstated and made permanent.

33. Authorities’ views. The policies of the American Rescue Plan made important in-roads into 

reducing poverty in the U.S. In particular, the refundable child tax credit and the earned income tax 

credit have had a demonstrated, powerful effect in supporting the poor, particularly families with 

children. Furthermore, the rapid repair from the pandemic—helped by significant policy support—

had increased employment opportunities for lower income workers and raised their wages.

Executive authority has been used to prevent work requirements being applied by states to 

Medicaid support and to fix the “family glitch” in the Affordable Care Act (whereby the qualification 

threshold for health insurance subsidies is based on the cost of the employer-provided plan for the 

individual only, excluding their dependents).

34. A strategy for deficit reduction will be needed to increase the general government 

primary balance to a modest surplus. A 1 percent of GDP general government primary surplus 

would be sufficient to put the public debt-GDP ratio on a downward path by the end of this decade 

(although the debt-GDP ratio would remain well above pre-pandemic levels for decades to come). 

As articulated in past Article IV consultations, there are a range of possibilities to achieve this 

medium-term goal. These could include scaling back poorly targeted tax expenditures (such as 

exemptions for employer-provided health care, for individuals selling their principal residence, for 

mortgage interest, and for state and local taxes), phasing in a federal consumption tax and/or a 

carbon tax (alongside well-designed assistance to protect the poor), reducing imbalances in the 

social security system, and containing health care costs.

13

35. Open trade policies, at home and abroad, remain vital to boosting economic 

performance and easing supply constraints. As a first step, the administration should roll back 

tariffs and other trade distortions that were introduced over the past 5 years (including the tariffs on 

steel, aluminum, and a range of products imported from China). Doing so would support growth 

and help reduce inflation. At the same time, the administration’s “worker-centered” trade policy 

could be bolstered by domestic policies—such as worker training, apprenticeship programs, and 

infrastructure development—to increase the productivity of U.S. firms and workers and increase 

their ability to compete in global markets. The U.S. should actively engage with all major trading 

12 K. Bergant, A. Medici, and A. Weber, “Winning the War? New Evidence on the Measurement and the Determinants 

of Poverty in the United States”, IMF WP 2022/004, find that the refundable child tax credit alone was able to halve 

child poverty. 

13 See A. Weber, L. Lin, and M. Mrkaic, “U.S. Healthcare: A Story of Rising Market Power, Barriers to Entry, and Supply 

Constraints”, IMF WP 2021/180.
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partners to address the core issues that risk fragmenting the global trade and investment system, 

trying to find common ground in areas such as tariffs, farm and industrial subsidies, and services 

trade. Strengthening U.S. engagement at the WTO—including by supporting a functioning dispute 

settlement system—would foster cooperation and help to promote the trade policy certainty that is 

so important to investment and growth.

36. Authorities’ views. The administration’s approach to trade is grounded in its workercentered trade policy and is designed to build a more equitable and inclusive economy, while 

protecting American workers. An example of the administration’s approach toward meaningful trade 

engagement includes the recently launched Indo-Pacific Economic Framework for Prosperity that 

the administration initiated with 13 countries seeking to fuel economic activity and investment, 

promote sustainable and inclusive economic growth, and benefit workers, consumers, and 

businesses across the region. The administration is seeking to make the WTO’s negotiating arm

more effective, to promote transparency, and to improve compliance and enforcement of WTO 

commitments. It is also seeking to effectively address non-market policies and practices such as 

subsidies and excess capacity, and is working together with partners (including the EU and Japan 

through the Trilateral partnership) to identify gaps in existing trade policy tools and where further 

work is needed to develop new tools. Clarification of WTO rules, as they apply to border carbon 

adjustments, would be helpful in avoiding future tensions. Finally, the administration sees tariffs as a 

valid tool for addressing the consequences of unfair competition, has begun a mandatory four-year 

review of Section 301 tariffs on China, and has maintained Section 232 national security tariffs on 

steel and aluminum, especially given distortions arising from global, non-market excess capacity. 

With the arrangements announced with the European Union, Japan, and the United Kingdom, the 

administration is working with partners to jointly take actions to address non-market excess capacity 

and to preserve the U.S. steel and aluminum industries.

37. There is a need to increase the resilience of U.S. supply chains. The administration has 

established an interagency Supply Chain Disruptions Task Force to improve the functioning of 

supply chains, address bottlenecks, and promote economic and national security. Legislation is also 

being considered to support domestic investment in specific products and technologies. A more 

resilient global production system would be beneficial to both the U.S. and the global economy. As 

the U.S. undertakes these efforts, it should incorporate best practices such as greater diversification 

of input sourcing across countries; improving infrastructure, logistics and information systems; and 

reducing trade costs. It will be important that the pursuit of supply chain resilience is not used as a 

motivation to favor domestic over foreign producers or to create incentives that fragment the global 

trading system.

38. Authorities’ views. The COVID-19 pandemic and subsequent recovery had highlighted the 

fragility of some global supply chains and these concerns were further fueled by the Russian 

invasion of Ukraine. A presidential task force has been established across multiple agencies to 

identify the source of disruptions and develop policy responses to ameliorate them. A particular 

emphasis was being placed on both economic and national security considerations and having in 

place a diverse and healthy ecosystem of suppliers. Policies are being developed on a sector-by-
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sector basis that would incentivize greater reliance on strategic allies and, in some cases, stockpiling 

certain commodities and products. The administration is currently prioritizing critical supply chains 

in semiconductors, large capacity batteries, critical mineral and materials, and pharmaceuticals. 

Policies include federal support for domestic manufacturing, deploying the Defense Production Act 

to expand capacity in critical industries, increasing public investments in research and development, 

building strategic stockpiles of critical products, and focusing federal procurement on domestically 

made products. Efforts are also underway with allies to strengthen collective supply chain resilience

and improve information on the structure of supply chains.

TRANSITIONING TO A LOW CARBON MODEL

39. Over the past year, steps have been taken to reduce emissions and transition to 

cleaner sources of energy. The Infrastructure Investment and Jobs Act included various provisions 

to expand public transit, build electric vehicle chargers, weatherize homes, and increase the 

resilience of roads, bridges, and the power grid. In addition, other changes have been made 

including raising fuel economy standards for passenger vehicles and putting in place an action plan 

to reduce methane emissions.

40. The authorities’ ambitious climate goals cannot be achieved without more determined

action. The setback in passing the Build Back Better Act endangers the achievement of the 

administration’s emission reduction goals. Regulatory and executive actions are unlikely to be 

sufficient to incentivize the needed transition to a low carbon economic model.14 A more effective

strategy would be one that combines broad-based carbon pricing, sectoral feebates, regulatory 

actions, and the elimination of subsidies for fossil fuel and carbon-intensive agriculture.

15 If the 

share of electricity generation from renewables can be significantly increased, including through 

instituting a national clean energy standard, policies should be put in place to incentivize a rapid 

switch to electric vehicles (e.g., by expanding federal tax credits, switching the federal fleet to electric 

vehicles, and accelerating the national build out of a comprehensive charging infrastructure).

Policies could usefully also focus on incentivizing improvements in the energy efficiency of existing 

and new buildings (including by retrofitting federally owned buildings) and reducing greenhouse 

gas emissions from agriculture.

41. The shift away from fossil fuels will be challenging. This transition will involve a 

significant reallocation of factors of production across sectors and skills (Box 8). Achieving this, while 

overcoming rigidities and preserving living standards, will require a concerted policy effort. The 

redeployment of workers will need to overcome a sizable skills mismatch, particularly for older 

workers. The country’s very flexible labor markets will be an advantage, but training and financial 

support for the most affected workers would facilitate a faster reallocation with lower societal costs.

14 See P. Barrett, K. Bergant, J. Chateau, and R. Mano, “Modeling the U.S. Climate Agenda: Macro-Climate Trade-offs 

and Considerations”, IMF WP 2021/290.

15 See 2021 Article IV Staff Report for an analysis of the policies necessary to achieve the administration’s emissions 

goals.
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Such policies should be put in place well ahead of time, to ensure decarbonization garners broad 

societal support and does not leave behind those communities that are currently reliant on fossil 

fuels for jobs, activity, and local tax revenue. 

42. The recent spike in global energy prices, as well as concerns about the reliability and 

security of energy supply, should create a powerful incentive to accelerate the transition to a 

carbon-neutral economy. National security concerns strengthen the already-strong case to reduce

the reliance on fossil fuels and prioritize renewables. The increased costs of fossil fuels relative to 

renewables should create an additional, market-based incentive to accelerate progress toward the 

U.S. national emission goals. In this regard, subnational decisions to lower the taxation of gasoline 

and other products go in the wrong direction; targeted support to vulnerable households would 

have been a preferred approach. 

43. The administration’s climate objectives should continue to be focused on reducing the 

carbon intensity of domestic consumption. However, even as U.S. fossil fuel consumption is 

reduced, a private sector-led expansion in U.S. export capacity (including through an acceleration in

the construction of LNG terminals and pipelines) would have positive outward spillovers, helping

trading partners increase the reliability of their energy mix as they too decarbonize. It will be critical, 

though, that such an expansion of domestic oil and gas production is coupled with strict regulations

to ensure those resources are developed cleanly (e.g., by introducing high penalties for methane 

leaks or flaring).

44. Authorities’ views. Important investments are already being made in infrastructure that will

help facilitate a shift to a low carbon economic model. The Infrastructure, Investment and Jobs Act 

had provided resources for building out a nationwide electric vehicle charging network, increasing 

building energy efficiency, investing in zero emission transit, upgrading the power grid and 

transmission lines, and spending on R&D for carbon storage and clean hydrogen. These investments 

are projected to crowd in significant funding from the private sector. Fuel economy standards for 

passenger vehicles had been made more stringent and efforts were being made to reduce methane 

emissions from a range of sources (including pipelines, cattle, and orphaned oil and gas wells). The 

set of climate policies outlined in the Build Back Better plan remain under active consideration. 

There are multiple pathways by which the U.S. goals for a reduction in emissions could be achieved 

and, while the full array of policies has not yet been established, progress over the past eighteen 

months had been considerable. A centerpiece of the administration’s plans is to ensure the 

transition to a low carbon future provides tangible benefits to disadvantaged communities 

(including through the Justice40 Initiative). This involves adopting place-based policies to facilitate 

the diversification of fossil fuel-dependent regional and local economies.
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Box 8. From Polluting to Green Jobs—A Seamless Transition?1

Green and pollution-intensive jobs tend to be 

located geographically close together. U.S. 

geographic labor mobility has declined over the 

years which could create an impediment for the 

green transition. However, using detailed data on 

job types across commuting zones suggests that 

areas that have a significant share of greenintensive employment also tend to be adjacent to 

areas with a high number of pollution-intensive 

jobs (72 percent of commuting zones that are rich 

in pollution intensive jobs are either also rich in 

green jobs or border a commuting zone that is). 

This suggests that geographic mobility alone may 

not be a meaningful friction that prevents workers 

in pollution-intensive industries from shifting to 

more environmentally friendly jobs.

However, green- and pollution-intensive jobs appear to

differ across a range of features which may signal more 

meaningful challenges in transitioning to a low carbon 

economy. Green jobs tend to be more skilled, more urban,

and relatively less vulnerable to automation. As a result, 

workers in green jobs command a wage premium (even after 

controlling for skill levels, age, gender, and geography). This 

would suggest that the nature of work in low carbon 

professions is different from that in polluting jobs. An 

illustration of the difficulty of switching into green industries is 

that the probability of transitioning into a green job is only 

around 15 percent for workers in polluting jobs but is around 45 percent for workers already employed in a 

green job. Workers in neutral jobs also face a low rate of transition into green jobs. 

Past transitions tied to changes in environmental 

regulation suggest that employment from affected 

sectors is able to smoothly reallocate within the same 

local region. Regression analysis shows that in commuting 

zones where regulations under the Clean Air Act (which 

regulates emissions from stationary sources) become more 

binding, there is a significant employment shift out of the 

polluting industry. However, overall employment in that 

commuting zone does not appear to be affected by the 

regulation. This suggests that workers are able to successfully 

reallocate—within the same commuting zone and without 

needing to relocate—to jobs that are not constrained by the 

environmental regulation. However, the data is unable to determine if those new, non-polluting jobs are at

similar levels of wages, benefits and job security.

1 K. Bergant, R. Mano, and I. Shibata, 2022, “From Polluting to Green Jobs—A Seamless Transition in the U.S.?” IMF 

WP/22/129.
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GOVERNANCE AND TRANSPARENCY

45. The U.S. continues to be substantially effective at investigating and prosecuting 

money laundering and cooperating with other jurisdictions over corruption proceeds located 

in the U.S. The U.S. has been confiscating assets related to foreign corruption that are located in the 

U.S. and has returned part of those assets to the affected countries. Nonetheless, some serious 

shortcomings—related to entity transparency and the content and coverage of preventive measures

(including in relation to identifying politically exposed persons)—makes it easier for foreign corrupt 

officials to hide their proceeds in the U.S. The U.S. still needs to subject gatekeepers—such as 

lawyers, accountants, and trust and company service providers—to customer due diligence and 

suspicious transaction reporting obligations. Action is also needed to address money laundering 

risks in high-end real estate. In particular, real estate agents are not subject to comprehensive 

AML/CFT requirements and non-bank mortgage lenders and originators have limited awareness of 

their AML/CFT obligations (especially regarding politically exposed persons). 

46. The U.S. authorities are advancing various initiatives to address these shortcomings, 

including as part of their strategy on countering corruption.

16 The U.S. is working to improve the 

availability of beneficial information about companies following the enactment of the Corporate 

Transparency Act. When fully operational, the U.S. will have a government-maintained national

registry of beneficial owners for certain U.S. companies.

17 Although the adoption of this Act is a 

positive step, implementation is expected to be incremental.18 The U.S. Treasury has continued to 

16 Issued on December 6, 2021, in the context of a Summit for Democracy. The strategy lays out how the U.S. will 

work domestically and internationally, with governmental and non-governmental partners, to address corruption and 

related crimes. The strategy places special emphasis on the transnational dimensions of the challenges posed by 

corruption, including by recognizing the ways in which corrupt actors have used the U.S. financial system and 

broader economy (e.g., role of enablers, real estate) and other rule-of-law based systems to launder their ill-gotten 

gains. It particularly calls to curb illicit finance, including by strengthening anti-money laundering frameworks in the 

U.S. and abroad.

17 On January 1, 2021, the U.S. Congress passed the William M. (Mac) Thornberry National Defense Authorization Act 

(NDAA) for Fiscal Year 2021 which includes the Corporate Transparency Act (CTA). The CTA, which will come into 

legal effect when implementing regulations are made, requires companies operating in the U.S. to provide ‘beneficial 

ownership’ information to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), the 

U.S.’ financial intelligence unit. The CTA requires the registration of the beneficial owner of U.S. and non-U.S. 

companies doing business in the United States, including the obligation to update changes to the beneficial 

ownership information. The detailed rules about implementing this aspect of the CTA are being developed following 

a period of public consultation which closed in February 2022. Another rule will be developed to establish who may 

access the information in the registry. Beneficial ownership information in the U.S. is unlikely to be fully available to 

the public, but it will be available to FinCEN (the national financial intelligence unit) which will then be able to share 

the information with relevant federal and state agencies and competent authorities from other countries, and, with 

the consent of the company, financial institutions to facilitate compliance with due diligence obligations. FinCEN has 

also signaled that it will need to revise its customer due diligence rule before the CTA comes into effect. FinCEN also 

has to develop the infrastructure to administer the CTA requirements. 

18 Tens of millions of companies operate in the U.S. and beneficial ownership of those established in the U.S. and 

often abroad was not collected during the registration process and when changes occurred. The proposed rules 

provide that companies created or registered after the requirements become effective would have 14 days after their 

formation to file their beneficial ownership information whereas companies formed before the effective date will 

have a year to file their initial reports.
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32 INTERNATIONAL MONETARY FUND

use Geographic Targeting Orders to collect certain information for high-end real estate purchases

and the Treasury has issued a notice of its intention to impose AML/CFT obligations on the real 

estate sector.19 Consideration is also being given to applying AML/CFT obligations to gatekeepers. 

Finally, the U.S. is advancing legislation to improve transparency in government procurement as a 

means of combatting corruption.20

STAFF APPRAISAL

47. The U.S. economy has staged a strong recovery from the COVID-19 shock. The positive 

effects of unprecedented policy stimulus, combined with the advantages of a highly flexible 

economy, have been clear. Just over two years after the COVID-19 shock, the unemployment rate 

and other measures of labor force underutilization have returned to end-2019 levels and output is 

close to its pre-pandemic trend. Rapid wage increases for lower income workers have reduced 

income polarization and poverty fell in 2020. On net, 8.5 million jobs have been created since the 

end of 2020. In addition, the swift policy response maintained the smooth functioning of U.S. 

financial markets and prevented a surge of bankruptcies (that many had feared). 

48. The rapid rebound has, though, been accompanied by a sharp increase in nominal 

wages and prices. Inflation was initially concentrated in a subset of durable goods as strong 

demand confronted binding supply constraints. However, toward the end of the summer, price 

pressures became broad based, affecting a significant slice of the consumption basket. Similarly, 

labor shortages were initially apparent in low skill occupations driving up wages for that segment. By 

the fourth quarter, wage pressures were quickly spreading across the economy as firms struggled to 

fill vacancies and workers switched jobs at an increasing frequency.

49. The policy priority must now be to expeditiously slow wage and price growth without 

precipitating a recession. This will be a tricky task. Global supply constraints and domestic labor 

shortages are likely to persist and the Russian invasion of Ukraine is creating additional

uncertainties. Although fiscal support is being withdrawn, the size and timing of the effects of past 

stimulus—which is expected to continue feed into activity and inflation through a drawdown of 

household savings—are highly uncertain. 

50. Returning to price stability will require an assertive withdrawal of monetary 

accommodation. Over the past six months, the Federal Reserve has reacted to shifts in incoming 

data by signaling its intent to pursue a much tighter policy stance. To decisively bring inflation back 

to the Federal Reserve’s 2 percent goal by late 2023/early 2024 will require both raising the policy 

rate above neutral, in ex ante real terms, and keeping it there for some time. The FOMC’s decision at 

its June meeting—to raise rates by 75 basis points and provide forward guidance around a path for 

19 See Federal Register: Anti-Money Laundering Regulations for Real Estate Transactions, issued December 8, 2021 

open for public comments until February 7, 2022. 

20 Section 885 of the FY21 National Defense Authorization Act (NDAA) requires prospective Federal contractors and 

grantees to disclose their beneficial ownership.
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INTERNATIONAL MONETARY FUND 33

the federal funds rate that peaks at close to 4 percent—strikes the right balance. This policy path 

should serve to create the up-front tightening of financial conditions that will be necessary to 

quickly bring inflation back to target. 

51. The FOMC will need to telegraph, well in advance, clear guidance on the path for the 

policy rate to ensure that the withdrawal of monetary accommodation is orderly, methodical, 

and transparent. Communications should continue to underscore that the FOMC’s policy guidance 

is not set in stone but will depend critically on future developments. Changes to strengthen the 

Federal Reserve’s communication tools would carry a high payoff in the current conjuncture, helping 

to ensure that policymakers’ expectations about the likely future path of the policy rate are clearly 

conveyed.

52. The difficult task of calibrating disinflationary policies comes with high stakes. 

Misjudging the policy mix—in either direction—will result in sizable economic costs at home and 

negative spillovers to the global economy. An overly forceful policy response runs the risk of 

triggering an abrupt tightening in financial conditions and a U.S. recession, creating negative 

spillovers to the global economy. An insufficient shift in policies, though, would frisk creating a 

prolonged period of high inflation that will necessitate even stronger—and more economically 

costly—measures in the future. In the baseline forecast, the U.S. is expected to slow but to narrowly 

avoid a recession. However, there are material risks that the economy again gets hit by a negative 

shock which could turn the slowdown into a short-lived recession.

53. The inability to pass much of the administration’s reform agenda represents a missed 

opportunity to energize the supply side of the U.S. economy. The economy urgently needs 

lasting changes to release supply-side constraints, raise productivity, support labor force 

participation, and incentivize investment and innovation. The slowing economy and rising inflation 

further strengthen the longstanding case for a better social safety net. Policymakers should continue 

to make the case for changes to tax, spending, and other areas (including immigration policy) to 

boost aggregate supply. Policy proposals should be pragmatically adapted, as needed, to garner 

political support. 

54. The 2021 external position remains moderately weaker than the level implied by 

medium-term fundamentals and desirable policies. The current account deficit is well below its 

medium-term norm and the recent real exchange rate appreciation may have further the degree of 

overvaluation. Open trade policies at home and abroad remain vital to U.S. economic performance. 

The U.S. should, therefore, roll back trade restrictions and tariffs that were introduced over the past 

5 years, work actively with trading partners to strengthen the rules-based multilateral trading 

system, and incorporate best practices to build supply resilience (such as greater diversification in 

input sourcing across countries, improved infrastructure and access to information, and reduced 

trade costs).

55. More determined action is needed to achieve the administration’s climate goals and to 

facilitate a smooth, speedy transition to a low carbon economy. In the absence of legislative 

approval of the climate provisions in the Build Back Better plan, the current reliance on regulatory 
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34 INTERNATIONAL MONETARY FUND

and executive actions appears insufficient to incentivize the transition to a low carbon economic 

model. A significant shift in market incentives will be required and this could be achieved most 

effective by a broad-based pricing of carbon and other pollutants, sectoral feebates, regulatory 

restraints on emissions, the elimination of subsidies for fossil fuels and carbon-intensive agriculture, 

and a reprioritization of public spending toward mitigation and adaptation goals. Past experience 

with large scale structural changes in the U.S. economy has made clear that, while such changes can 

generate aggregate benefits, they can also impose costs on a large part of the population. If the 

shift to a low carbon economic model is to be successful and receive societal support, it will need to 

embed—right from the start—policies that help lessen rigidities in reallocating factors of production 

across sectors and regions; ensure the right human capital is available to meet the demands of a low 

carbon economy; and meaningfully support those who bear a disproportionate share of the burden 

of adjustment.

56. It is recommended that the next Article IV consultation take place on the standard 12-

month cycle.
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INTERNATIONAL MONETARY FUND 35

Table 1. United States: Selected Economic Indicators

(Percentage change from previous period, unless otherwise indicated)

2019 2020 2021 2022 2023 2024 2025 2026 2027

National Production and Income

Real GDP 2.3 -3.4 5.7 2.9 1.7 0.8 1.7 2.1 1.9

Real GDP (q4/q4) 2.6 -2.3 5.5 2.2 0.7 1.2 1.9 2.1 1.7

Net exports 1/ -0.2 -0.3 -1.4 -0.9 0.3 0.4 0.2 0.0 0.0

Total domestic demand 2.4 -3.0 6.9 3.6 1.4 0.5 1.5 2.0 1.8

Final domestic demand 2.4 -2.5 6.5 2.8 1.6 0.7 1.6 2.0 1.8

Private final consumption 2.2 -3.8 7.9 3.5 1.7 0.4 1.4 1.8 1.7

Public consumption expenditure 2.0 2.0 1.0 -0.5 1.1 1.2 1.3 1.3 1.3

Gross fixed domestic investment 3.1 -1.5 6.1 2.6 1.3 1.1 2.6 2.9 2.4

Private fixed investment 3.2 -2.7 7.8 3.2 0.8 0.6 2.3 2.8 2.8

Public fixed investment 2.9 4.2 -1.8 -0.8 4.4 4.1 3.9 3.4 0.5

Change in private inventories 1/ 0.1 -0.5 0.3 0.9 -0.2 -0.2 -0.1 0.0 0.0

Nominal GDP 4.1 -2.2 10.1 9.8 4.8 2.8 3.6 4.0 3.9

Personal saving rate (% of disposable income) 7.7 16.4 12.2 4.3 5.2 6.7 7.5 7.4 7.3

Private investment rate (% of GDP) 17.9 17.4 17.9 18.8 18.3 18.0 18.0 18.1 18.3

Unemployment and Potential Output

Unemployment rate 3.7 8.1 5.4 3.5 3.9 4.7 4.6 4.2 4.0

Labor force participation rate 63.1 61.8 61.7 62.3 62.4 62.5 62.4 62.2 62.0

Potential GDP 1.6 0.4 1.8 2.2 2.0 1.9 1.8 1.7 1.7

Output gap (% of potential GDP) 0.7 -3.2 0.5 1.3 0.9 -0.2 -0.2 0.1 0.2

Inflation

CPI inflation (q4/q4) 2.0 1.2 6.7 6.8 1.9 1.9 1.9 2.0 2.1

Core CPI Inflation (q4/q4) 2.3 1.6 5.0 5.6 2.4 2.2 2.2 2.3 2.3

PCE Inflation (q4/q4) 1.5 1.2 5.5 5.4 2.0 1.8 1.8 1.9 1.9

Core PCE Inflation (q4/q4) 1.6 1.4 4.6 4.6 2.2 2.0 2.0 2.0 2.0

GDP deflator 1.8 1.2 4.1 6.7 3.1 2.0 1.9 1.9 2.0

Government Finances

Federal balance (% of GDP) 2/ -4.7 -15.0 -12.4 -4.5 -4.3 -4.9 -5.8 -5.7 -5.4

Federal debt held by the public (% of GDP) 79.4 100.3 99.6 97.9 96.6 98.9 101.4 103.2 104.7

General government budget balance (% of GDP) 2/ -5.7 -14.5 -10.9 -4.6 -4.8 -5.7 -6.4 -6.3 -6.2

General government gross debt (% of GDP) 108.8 134.3 127.8 121.3 121.0 123.8 126.3 128.1 129.8

Interest Rates (percent; period average)

Fed funds rate 2.2 0.4 0.1 1.5 3.8 3.5 2.7 2.4 2.4

Three-month Treasury bill rate 2.1 0.4 0.0 1.6 3.8 3.5 2.7 2.3 2.3

Ten-year government bond rate 2.1 0.9 1.4 3.0 4.0 3.9 3.5 3.2 3.1

Balance of Payments

Current account balance (% of GDP) -2.2 -2.9 -3.6 -3.7 -3.1 -2.6 -2.4 -2.2 -2.1

Merchandise trade balance (% of GDP) -4.0 -4.4 -4.7 -5.1 -4.7 -4.3 -4.1 -4.0 -3.9

Export volume (NIPA basis, goods) -0.1 -10.2 7.6 3.1 1.7 0.9 2.1 2.3 2.2

Import volume (NIPA basis, goods) 0.5 -5.6 14.6 8.9 0.1 -1.3 0.4 1.5 1.6

Net International Investment Position (% of GDP) -52.6 -67.1 -78.7 -75.4 -75.1 -75.7 -75.4 -74.7 -74.0

Saving and Investment (% of GDP)

Gross national saving 19.4 19.2 20.1 21.2 21.2 21.4 21.7 21.9 22.0

General government -2.9 -11.6 -8.1 -1.2 -1.3 -2.2 -3.0 -3.4 -3.5

Private 22.3 30.8 28.2 22.3 22.5 23.6 24.7 25.3 25.5

Personal 5.8 13.8 9.9 3.2 3.9 5.1 5.7 5.5 5.5

Business 16.5 17.0 18.3 19.2 18.6 18.5 19.0 19.8 20.0

Gross domestic investment 21.4 21.2 21.4 22.2 21.8 21.6 21.7 21.8 21.9

Private 17.9 17.4 17.9 18.8 18.3 18.0 18.0 18.1 18.3

Public 3.5 3.7 3.5 3.4 3.5 3.6 3.7 3.7 3.7

Sources: BEA; BLS; FRB; Haver Analytics; and IMF staff estimates.

1/ Contribution to real GDP growth, percentage points.

2/ Includes staff's adjustments for one-off items, including costs of financial sector support.

Projections
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Table 2. United States: Balance of Payments

(Annual percent change unless otherwise indicated)

2019 2020 2021 2022 2023 2024 2025 2026 2027

Real Exports Growth

Goods and services -0.1 -13.6 4.5 4.8 3.8 2.2 2.5 2.5 2.3

Goods -0.1 -10.2 7.6 3.1 1.7 0.9 2.1 2.3 2.2

Services -0.1 -19.8 -1.6 9.1 8.8 4.9 3.5 2.9 2.7

Real Imports Growth

Goods and services 1.1 -8.9 14.0 9.3 1.0 -0.6 0.9 1.9 1.9

Goods 0.5 -5.6 14.6 8.9 0.1 -1.3 0.4 1.5 1.6

Nonpetroleum goods 1.2 -5.1 15.0 8.4 -0.1 -1.2 0.7 1.8 1.8

Petroleum goods -5.8 -12.4 5.5 12.2 1.7 -2.5 -3.0 -1.7 -1.6

Services 3.9 -22.6 11.5 11.5 5.4 2.7 2.8 3.4 3.4

Net Exports (contribution to real GDP growth) -0.2 -0.3 -1.4 -0.9 0.3 0.4 0.2 0.0 0.0

Nominal Exports

Goods and services 11.8 10.2 10.8 11.5 11.7 11.8 11.9 11.9 11.9

Nominal Imports

Goods and services 14.6 13.3 14.8 15.9 15.5 15.1 14.9 14.7 14.7

Current Account 

Current account balance -2.2 -2.9 -3.6 -3.7 -3.1 -2.6 -2.4 -2.2 -2.1

Balance on trade in goods and services -2.7 -3.2 -3.7 -4.1 -3.5 -3.0 -2.7 -2.6 -2.5

Balance on income 0.5 0.3 0.2 0.4 0.4 0.4 0.4 0.4 0.4

Capital and Financial Account

Capital account balance 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Financial account balance -2.2 -3.1 -3.0 -3.7 -3.1 -2.7 -2.4 -2.2 -2.1

Direct investment, net -0.8 0.5 0.2 -0.3 -0.3 -0.3 -0.3 -0.3 -0.3

Portfolio investment, net -0.9 -2.3 0.1 -1.3 -1.0 -0.5 -0.1 -0.2 -0.2

Financial derivatives, net -0.2 0.0 -0.2 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1

Other investment, net -0.3 -1.3 -3.6 -2.0 -1.7 -1.8 -1.8 -1.7 -1.6

Reserve assets, net 0.0 0.0 0.5 0.0 0.0 0.0 0.0 0.0 0.0

Errors and Omissions 0.0 -0.2 0.6 0.0 0.0 0.0 0.0 0.0 0.0

Net International Investment Position -52.6 -67.1 -78.7 -75.4 -75.1 -75.7 -75.4 -74.7 -74.0

Direct investment, net -8.3 -12.3 -16.5 -15.4 -15.0 -15.0 -14.8 -14.5 -14.3

Portfolio investment, net -38.4 -48.0 -52.9 -49.6 -48.4 -47.6 -46.1 -44.6 -43.1

Financial derivatives, net 0.1 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1

Other investment, net -8.3 -9.7 -12.5 -13.4 -14.5 -15.8 -17.1 -18.1 -19.0

Reserve assets, net 2.4 3.0 3.1 2.8 2.7 2.6 2.5 2.4 2.3

Memorandum Items

Current account balance (US$ billions) -472 -616 -822 -944 -831 -720 -667 -650 -648

Non-oil trade balance (% of GDP) -2.7 -3.1 -3.9 -4.3 -3.7 -3.3 -3.1 -2.9 -2.9

Foreign real GDP growth 1.7 -5.0 5.5 3.2 3.0 2.5 2.4 2.4 2.3

U.S. real GDP growth 2.3 -3.4 5.7 2.9 1.7 0.8 1.7 2.1 1.9

U.S. real total domestic demand growth 2.4 -3.0 6.9 3.6 1.4 0.5 1.5 2.0 1.8

Sources: BEA; FRB; Haver Analytics; and IMF staff estimates.

Projections
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Table 3. United States: Federal and General Government Finances 

(Percent of GDP)

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031

Federal Government

Revenue 16.4 16.3 18.1 19.6 18.6 18.0 17.6 18.0 18.3 18.1 18.1 18.1 18.1

Expenditure 21.0 31.3 30.5 24.1 22.9 22.9 23.4 23.7 23.7 24.1 23.3 23.7 23.8

Non-interest 19.3 29.7 28.9 22.4 20.9 20.4 20.6 20.7 20.7 21.1 20.5 20.9 20.9

Interest 1.8 1.6 1.6 1.7 2.0 2.5 2.8 3.0 3.0 2.9 2.8 2.8 2.9

Budget balance 1/ -4.7 -15.0 -12.4 -4.5 -4.3 -4.9 -5.8 -5.7 -5.4 -5.9 -5.2 -5.6 -5.7

Primary balance 2/ -2.9 -13.3 -10.8 -2.8 -2.3 -2.4 -3.0 -2.7 -2.4 -3.0 -2.4 -2.8 -2.8

Primary structural balance 3/ 4/ -3.0 -10.4 -7.6 -3.0 -2.5 -2.4 -2.9 -2.6 -2.4 -2.9 -2.3 -2.7 -2.7

 Change -0.8 -7.4 2.8 4.5 0.5 0.2 -0.5 0.3 0.2 -0.6 0.6 -0.4 0.0

Federal debt held by the public 79.4 100.3 99.6 97.9 96.6 98.9 101.4 103.2 104.7 106.7 107.8 109.6 111.2

General Government

Revenue 30.1 30.8 31.4 33.0 32.1 31.5 31.3 31.7 31.9 31.8 31.8 31.7 31.7

Expenditure 35.8 45.3 42.4 37.6 37.0 37.3 37.7 38.0 38.1 38.1 37.5 37.8 37.8

 Net interest 2.2 2.1 2.5 1.8 2.1 2.8 3.1 3.3 3.3 3.1 3.0 3.0 3.1

Net lending 1/ -5.7 -14.5 -10.9 -4.6 -4.8 -5.7 -6.4 -6.3 -6.2 -6.3 -5.8 -6.1 -6.1

Primary balance 2/ -3.5 -12.4 -8.4 -2.8 -2.7 -3.0 -3.3 -3.0 -2.9 -3.2 -2.8 -3.1 -3.0

Primary structural balance 3/ 4/ -3.9 -8.4 -5.6 -3.2 -3.1 -2.9 -3.2 -2.9 -2.9 -3.1 -2.8 -3.1 -1.6

 Change -0.8 -4.5 2.8 2.4 0.1 0.3 -0.3 0.3 0.0 -0.3 0.4 -0.3 1.5

Gross debt 108.8 134.3 127.8 121.3 121.0 123.8 126.3 128.1 129.8 131.5 132.6 134.0 135.3

incl. unfunded pension liab. 136.3 161.5 150.5 144.0 143.5 146.3 148.8 150.5 152.1 153.7 154.7 156.0 157.3

1/ Includes staff's adjustments for one-off items, including costs of financial sector support.

2/ Excludes net interest.

3/ Excludes net interest, effects of economic cycle, and costs of financial sector support.

4/ Percent of potential GDP.

Note: Fiscal projections are based on Congressional Budget Office forecast adjusted for the IMF staff’s policy and 

macroeconomic assumptions. Projections incorporate the effects of enacted legislation at the time of the publication of this 

table and also potential legislation to be passed under the American Jobs Plan and the American Families Plan. Fiscal 

projections are adjusted to reflect the IMF staff’s forecasts for key macroeconomic and financial variables and different 

accounting treatment of financial sector support and of defined-benefit pension plans and are converted to a general 

government basis. Data are compiled using SNA 2008, and when translated into GFS this is in accordance with GFSM 

2014.

Sources: Congressional Budget Office; Office of Management and Budget; and IMF staff estimates.

Projections
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Table 4. United States: Core Financial Soundness Indicators for Deposit Takers

(Percent unless otherwise indicated, eop)

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Regulatory Capital to Risk-Weighted Assets 14.5 14.4 14.4 14.1 14.2 14.5 14.8 14.7 16.3 16.4

Regulatory Tier 1 Capital to Risk-Weighted Assets 12.7 12.8 13.1 13.1 13.2 13.5 13.8 13.7 14.5 14.8

Non-Performing Loans Net of Provisions to Capital 15.7 11.7 8.8 7.2 6.6 5.7 4.7 4.3 5.2 4.4

Non-Performing Loans to Total Gross Loans 3.3 2.5 1.9 1.5 1.3 1.1 0.9 0.9 1.1 0.8

Sectoral Distribution of Total Loans: Residents 1/ 95.5 95.2 95.6 95.8 96.1 96.0 96.3 96.3 96.7 96.7

Sectoral distribution of total loans: deposit-takers 6.0 5.0 4.1 3.6 3.8 3.9 5.5 4.6 6.1 6.1

Sectoral distribution of total loans: other financial corporations 4.4 5.2 6.2 6.7 6.7 6.9 7.3 7.8 8.5 8.5

Sectoral distribution of total loans: general government 1.1 1.2 1.3 1.4 1.5 1.6 1.5 1.4 1.4 1.4

Sectoral distribution of total loans: nonfinancial corporations 32.1 33.3 34.2 35.0 35.5 35.4 35.3 35.4 36.4 36.4

Sectoral distribution of total loans: other domestic sectors 51.9 50.5 49.8 49.1 48.5 48.2 46.7 47.1 44.2 44.2

Sectoral Distribution of Total Loans: Nonresidents 1/ 4.5 4.8 4.4 4.2 3.9 4.0 3.7 3.7 3.3 3.3

Return on Assets 0.3 0.4 0.3 0.4 0.4 0.3 0.4 0.3 0.3 1.4

Return on Equity 2.7 3.3 2.8 3.0 3.2 2.9 3.4 2.9 3.0 11.6

Interest Margin to Gross Income 60.8 63.5 63.7 63.4 65.1 67.0 68.3 66.9 64.3 64.6

Non-Interest Expenses to Gross Income 63.6 61.7 64.7 60.7 59.6 61.6 58.4 60.4 62.7 63.3

Liquid Assets to Total Assets (liquid asset ratio) 13.4 14.5 14.5 13.2 12.8 13.2 12.7 11.8 17.7 34.4

Liquid Assets to Short Term Liabilities 74.1 88.3 90.0 91.2 98.2 97.7 89.3 84.3 183.6 436.3

Source: Haver Analytics, FDIC.

1/ Data available until 2021Q2.
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Appendix I. Risk Assessment Matrix

Risks Likelihood Expected Impact Policy Response

Global Risks

Russia’s invasion of Ukraine leads 

to escalation of sanctions and 

other disruptions. Sanctions on 

Russia are broadened to include oil, 

gas, and food sectors. Russia is 

disconnected almost completely 

from the global financial system and 

large parts of the trading system. 

This, combined with Russian 

countersanctions and secondary 

sanctions on countries and 

companies that continue business 

with Russia, leads to even higher 

commodity prices, refugee 

migration, tighter financial 

conditions, and other adverse 

spillovers, which particularly affect 

LICs and commodity-importing 

EMs.

High

Medium. Slower growth by 

trading partner reduces external 

demand for U.S. exports. Tighter 

financial conditions and weaker 

consumer confidence weigh on 

domestic activity.

Make investments to increase 

resilience of financial 

intermediation. Adjust the pace of 

planned monetary tightening 

commensurately according to the 

assessed downturn in activity.

Rising and volatile food and 

energy prices. Commodity prices 

are volatile and trend up amid 

supply constraints, war in Ukraine, 

export restrictions, and currency 

depreciations. This leads to shortrun disruptions in the green 

transition, bouts of price and real 

sector volatility, food insecurity, 

social unrest, and acute food and 

energy crises (especially in EMDEs 

with lack of fiscal space).

High

Medium. Rising commodity 

prices from current high levels 

further reduce corporate profit 

margins, weaken household 

consumption, increase poverty, 

further raise inflation and 

inflation expectations from 

current elevated levels.

Facilitate the expansion of domestic 

production of food and fuel. 

Increase the provision of food 

assistance to lower income 

households. Accelerate the 

transition to a low carbon economic 

model. Monetary policy responds 

assertively to any de-anchoring of 

inflation expectations.

Abrupt growth slowdown in 

China. A combination of extended 

COVID-19 lockdowns, rising 

geopolitical tensions, a sharperthan-expected slowdown in the 

property sector, and/or inadequate 

policy responses result in a sharp 

slowdown of economic activity, with 

spillovers affecting other countries 

through supply chain disruptions, 

trade, commodity-price, and 

financial channels.

Medium

Medium. A large decline of 

imports from a significant 

trading partner leads to further 

shortages in industry supplies 

and consumer goods, weighing 

on growth and further raising 

inflation.

Diversify sources of supply and 

recalibrate the pace of withdrawal 

of monetary and fiscal support in 

event of significant impact on 

activity. 

Outbreaks of lethal and highly 

contagious COVID-19 variants. 

Rapidly increasing hospitalizations 

and deaths due to low vaccine 

protection or vaccine-resistant 

variants force more social distancing 

and/or new lockdowns. This results 

in extended supply chain 

disruptions and a reassessment of 

growth prospects, triggering capital 

outflows, financial tightening, 

Medium

High. Renewed economic 

disruptions and higher

unemployment result in 

subdued consumption and

longer-term damage to labor 

force participation and human 

capital. Financial institutions’ 

losses impair the availability of 

credit, with further adverse 

implications for growth.

Increase coverage of booster shots 

and establish a “standing army” for 

public health to create idle capacity 

in testing and medical supplies. 

Build a rapid-response unit that 

could be deployed for testing, 

tracking and treatment of viruses.

Policies should support the public 

health response, minimize undue 

balance sheet dislocations, and 
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40 INTERNATIONAL MONETARY FUND

Risks Likelihood Expected Impact Policy Response

Global Risks

currency depreciations, and debt 

distress in some EMDEs.

provide targeted support to 

households. 

De-anchoring of inflation 

expectations. Worsening supplydemand imbalances, higher 

commodity prices (in part due to 

war in Ukraine), and higher nominal 

wage growth lead to persistently 

higher inflation and/or inflation 

expectations, prompting central 

banks to tighten policies faster than 

anticipated. The resulting sharp 

tightening of global financial 

conditions and spiking risk premia 

lead to lower global demand, 

currency depreciations, asset market 

selloffs, bankruptcies, sovereign 

defaults, and contagion across 

EMDEs.

Medium

High. High realized wage and 

price inflation, resulting from a 

sustained mismatch in supply 

and demand, proves persistent 

and causes a de-anchoring of 

inflation expectations.

Expeditiously raise policy rates and 

clearly signal that the ex-ante real 

rate will need to go above neutral, 

and remain there for some time. 

Improve the Federal Reserve’s 

communications toolkit.

Cyberthreats. Cyberattacks on 

critical physical or digital 

infrastructure (including digital 

currency platforms) trigger financial 

instability or widespread disruptions 

in socio-economic activities.

Medium

High. Disruption is widespread 

including to supply of essential 

goods, payments systems, and 

financial market infrastructure.

Further build resilience in physical 

and digital infrastructure using the 

full range of fiscal and regulatory 

tools.

Domestic Risks

A more abrupt tightening of 

financial conditions. Continued 

upside surprises to inflation could 

shift market views on the likely path 

for the federal funds rate and, more 

broadly, on asset valuations. Medium

High. Abruptly tighter financing

conditions could cause stress in 

leveraged corporates, non-bank 

financial institutions, and 

treasury markets. Higher 

financing costs and lower credit 

availability may constrain 

investment and employment 

growth, slowing activity with

negative outward spillovers.

Tighter financial conditions will be 

necessary for the monetary 

transmission but if market 

functioning is compromised then 

targeted measures (such as 

providing liquidity in specific 

markets) could be considered.

Persistently slow recovery in 

labor force participation. Higher 

wages fail to boost labor supply 

and/or renewed health concern 

leads to a decline in labor 

participation.

Medium

High. Wage growth would 

continue to rise, putting 

pressure on corporate margins, 

and potentially further fueling 

inflation. Also, supply 

constraints would slow activity.

The withdrawal of fiscal and 

monetary accommodation should 

help rebalance supply and demand 

in labor markets. Supply side 

policies (such as paid family leave, 

childcare, EITC, immigration reform) 

would help boost labor supply.
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Appendix II. Sovereign Risk and Debt Sustainability Assessment

Following the unprecedented fiscal response to the COVID-19 outbreak, the U.S. budget deficit 

contracted in 2021 and is expected to return to pre-pandemic levels, in percent of GDP, by 2022. Under 

the baseline scenario, public debt is projected to rise as a share of GDP over the medium term as 

aging-related expenditures on health and social security feed into the debt dynamics. Gross financing 

needs are large, albeit manageable given the global reserve currency status of the U.S. dollar. A 

credible medium-term fiscal adjustment featuring reprioritization of budget programs and revenuegaining tax reform is needed to put public debt on a downward path. Nonetheless, the risks of debt 

distress are low, and debt is viewed as sustainable.

1. Background. An unprecedented scale of fiscal expansion was introduced in response to the 

COVID-19 pandemic increasing the fiscal deficit by over 9 percent of GDP. The American Rescue 

Plan (passed in March 2021) slowed the pace of fiscal contraction in 2021–22 but did not forestall it. 

A large fiscal consolidation is now underway and pandemic-related extraordinary measures are 

expiring.

2. Baseline. The staff’s baseline is based on current and likely-to-be-passed laws. Under this 

baseline, public debt is expected to rise over the medium term as age-related spending pressures 

on entitlement programs assert themselves. Federal debt held by the public is projected to increase 

from about 100 percent of GDP in FY2021 to around 113 percent of GDP by 2031, with general 

government gross debt rising from about 128 percent of GDP to 135 percent of GDP over the same 

period.

3. Adjustment Scenario. The general 

government primary deficit was 8.4 percent of GDP in 

2021 and is projected at 2.8 percent of GDP in 2022. 

Gradually raising the primary general government 

surplus over the medium-term to around 1 percent of 

GDP (1.1 percent of GDP for the federal government) 

would put the debt-to-GDP ratio on a declining path. 

The target primary surplus would have to be larger to 

bring the debt ratio closer to pre-Great Recession 

levels.

4. Debt servicing costs. The debt projections benefit from the current favorable interest rate–

growth differential, reflecting accommodative monetary policy and the safe-haven status of the 

United States. Under staff’s baseline, the effective nominal interest rate is projected to rise gradually 

from the projected level of 1.9 percent in 2022 to 2.7 percent by 2031 (which is close to the 2010–18 

average level). As a result, real interest rates will continue to act as a debt-reducing flow over the 

medium-term.

5. Realism. Baseline economic assumptions are generally within the error band observed for all 

countries. The baseline fiscal projections and implied near-term adjustment are outliers compared 

with historical and cross-country experience but are nevertheless realistic given the large but 

temporary fiscal expansion put in place in response to the pandemic.

6. Mitigating factors. The depth and liquidity of the U.S. Treasury market, as well as its safehaven status, represents a mitigating factor for the high external and gross financing requirements.
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42 INTERNATIONAL MONETARY FUND

Appendix II. Figure 1. United States: Risk of Sovereign Stress

Overall ... Low

Near Term 1/

Medium Term Moderate Moderate

Fanchart High ...

GFN Moderate ...

Stress test ...

Long Term ... Moderate

Debt Stabilization in the Baseline

Staff's assessment on the medium-term risk is "moderate", which is 

aligned with the mechanical signal. The mechanical medium-term signal 

for the fan chart indicates a "high" risk, largely driven by the probability 

of debt non-stabilization.

No

DSA Summary Assessment

Staff commentary: United States is at a low overall risk of sovereign stress and debt is sustainable. Most indicators have 

started to normalize as the recovery from the COVID-19 shock has proceeded. However, debt is expected to rise for 

several years before stabilizing. Medium-term liquidity risks as analyzed by the GFN Financeability Module are 

moderate. Over the longer run, United States should continue with reforms to tackle risks arising from population 

aging on the social security fund. However, the long time horizon at which these risks would materialize and the 

authorities' planned measures will help contain risks.

Source: Fund staff.

Note: The risk of sovereign stress is a broader concept than debt sustainability. Unsustainable debt can only be 

resolved through exceptional measures (such as debt restructuring). In contrast, a sovereign can face stress without its 

debt necessarily being unsustainable, and there can be various measures—that do not involve a debt restructuring—to 

remedy such a situation, such as fiscal adjustment and new financing.

1/ The near-term assessment is not applicable in cases where there is a disbursing IMF arrangement. In surveillanceonly cases or in cases with precautionary IMF arrangements, the near-term assessment is performed but not published.

2/ A debt sustainability assessment is optional for surveillance-only cases and mandatory in cases where there is a Fund 

arrangement. The mechanical signal of the debt sustainability assessment is deleted before publication. In surveillanceonly cases or cases with IMF arrangements with normal access, the qualifier indicating probability of sustainable debt 

("with high probability" or "but not with high probability") is deleted before publication.

Mechanical 

Signal

Final 

Assessment Horizon Comments

...

Sustainability 

Assessment 2/ ... Not required for surveillance-only countries.

Staff's assessment of the overall risk of sovereign stress is low. Mitigating 

factors include the strength of institutions, the depth of the investor 

pool, the role of the U.S. dollar in the international system, and the Fed’s 

stabilizing role. 

Long-term risks are moderate as aging-related expenditures on health 

and social security feed into debt dynamics. 
UNITED STATES

INTERNATIONAL MONETARY FUND 43

Appendix II. Figure 2. United States: Debt Coverage and Disclosures

1. Debt coverage in the DSA: 1/ CG GG NFPS CPS Other

1a. If central government, are non-central government entities insignificant? n.a.

2. Subsectors included in the chosen coverage in (1) above:

Subsectors captured in the baseline Inclusion

1 Budgetary central government Yes

2 Extra budgetary funds (EBFs) No

3 Social security funds (SSFs) Yes

4 State governments Yes

5 Local governments Yes

6 Public nonfinancial corporations Yes

7 Central bank Yes

8 Other public financial corporations Yes

3. Instrument coverage:

4. Accounting principles:

5. Debt consolidation across sectors:

Color code: █ chosen coverage █ Missing from recommended coverage █ Not applicable

Holder

Issuer

1 Budget. central govt 22.6 22.6

2 Extra-budget. funds 0

3 Social security funds 0

4 State govt. 1451.4 1451.4

5 Local govt. 0

6 Nonfin pub. corp. 0

7 Central bank 0

8 Oth. pub. fin. corp 0

Total 1451.4 0 0 22.6 0 0 0 0 1474

Total

Reporting on Intra-Government Debt Holdings

Nonfin. 

pub. 

corp.

Central 

bank

Oth. pub. 

fin corp

Budget. 

central 

govt

Extrabudget. 

funds 

Social 

security 

funds 

State govt.Local govt.

NFPS

GG: expected

1/ CG=Central government; GG=General government; NFPS=Nonfinancial public sector; PS=Public sector. 

2/ Stock of arrears could be used as a proxy in the absence of accrual data on other accounts payable. 

3/ Insurance, Pension, and Standardized Guarantee Schemes, typically including government employee pension liabilities. 

4/ Includes accrual recording, commitment basis, due for payment, etc. 

5/ Nominal value at any moment in time is the amount the debtor owes to the creditor. It reflects the value of the instrument at 

creation and subsequent economic flows (such as transactions, exchange rate, and other valuation changes other than market price 

changes, and other volume changes). 

6/ The face value of a debt instrument is the undiscounted amount of principal to be paid at (or before) maturity. 

7/ Market value of debt instruments is the value as if they were acquired in market transactions on the balance sheet reporting date 

(reference date). Only traded debt securities have observed market values. CG CPS

Comments

Basis of recording Valuation of debt stock

Not applicable

Debt 

securities

Loans IPSGSs 3/

Currency 

& 

deposits

Oth acct. 

payable 

2/

Non-consolidated

CPS

NFPS

GG: expected

CG

Non-cash 

basis 4/

Cash 

basis

Nominal 

value 5/

Face 

value 6/

Consolidated

Market 

value 7/
UNITED STATES

44 INTERNATIONAL MONETARY FUND

Appendix II. Figure 3. United States: Public Debt Structure Indicators

Debt by Currency (percent of GDP)

Note: The perimeter shown is general government.

Public Debt by Holder (percent of GDP) Public Debt by Governing Law, 2021 (percent)

Note: The perimeter shown is general government. Note: The perimeter shown is general government.

Debt by Instruments (percent of GDP) Public Debt by Maturity (percent of GDP)

Note: The perimeter shown is general government. Note: The perimeter shown is general government.

Projection

0

20

40

60

80

100

120

140

160

2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Foreign currency Local currency

0

50

100

150

2012 2014 2016 2018 2020

External private creditors

External official creditors

Domestic other creditors

Domestic commercial banks

Domestic law International law Multilateral

Proj

0

20

40

60

80

100

120

140

160

2017 2019 2021 2023 2025 2027

≤ 1 year 1-5 years > 5 years

Residual maturity: 6. years

Proj.

0

20

40

60

80

100

120

140

160

2017 2019 2021 2023 2025 2027

Marketable debt Nonmarketable debt
UNITED STATES

INTERNATIONAL MONETARY FUND 45

Appendix II. Figure 4. United States: Baseline Scenario

(Percent of GDP unless indicated otherwise)

Actual

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031

Public debt 127.8 121.2 120.5 123.3 125.7 127.3 129.0 131.1 132.7 134.5 136.2.

Change in public debt -6.5 -6.6 -0.6 2.8 2.4 1.6 1.7 2.1 1.6 1.8 1.6.

Contribution of identified flow -0.9 -6.6 -0.6 2.8 2.4 1.6 1.7 2.1 1.6 1.8 1.6.

Primary deficit 8.4 2.7 2.6 2.9 3.2 2.9 2.8 3.1 2.8 3.0 3.0.

Noninterest revenues 31.0 32.6 31.7 31.1 30.9 31.3 31.5 31.5 31.6 31.7 31.8.

Noninterest expenditures 39.4 35.3 34.4 34.0 34.1 34.2 34.3 34.6 34.3 34.7 34.7.

Automatic debt dynamics -9.3 -9.3 -3.3 -0.1 -0.9 -1.3 -1.1 -1.0 -1.2 -1.2 -1.4.

Int. rate-growth differentia -9.3 -9.3 -3.3 -0.1 -0.9 -1.3 -1.1 -1.0 -1.2 -1.2 -1.4.

Real interest rate -2.1 -5.6 -1.1 0.8 1.2 1.3 1.2 1.2 1.0 1.0 0.9.

Real growth rate -7.2 -3.8 -2.1 -0.9 -2.1 -2.5 -2.3 -2.2 -2.2 -2.2 -2.2.

Real exchange rate 0.0 ... ... ... ... ... ... ... ... ... ......

Relative inflation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0.

Other identified flows 0.0 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4.

Contingent liabilities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0.

Other transactions 0.0 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4.

Contribution of residual -5.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0.

Gross financing needs 57.2 36.5 30.9 28.9 27.9 27.0 26.4 26.5 26.0 26.5 26.0.

of which: debt service 49.2 34.2 28.6 26.4 25.1 24.6 24.0 23.8 23.7 23.9 23.5.

Local currency 49.2 34.2 28.6 26.4 25.1 24.6 24.0 23.8 23.7 23.9 23.5.

Foreign currency 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0.

Memo:

Real GDP growth (percent) 5.7 3.0 1.8 0.8 1.8 2.1 1.9 1.7 1.7 1.7 1.7.

Inflation (GDP deflator; percen 4.1 6.7 3.1 2.0 1.9 1.9 2.0 2.0 2.0 2.0 2.0.

Nominal GDP growth (percent 10.1 9.9 4.9 2.8 3.7 4.0 3.9 3.7 3.7 3.7 3.7.

Effective interest rate (percent) 2.4 1.9 2.1 2.7 2.9 3.0 3.0 2.9 2.8 2.7 2.7.

Medium-term projection Extended projection

Contribution to Change in Public Debt

(percent of GDP)

Staff commentary: Public debt will rise a bit but then stablize, reflecting expectations of a narrowing of primary deficits and 

stable economic conditions. 

Projection

-20

-15

-10

-5

0

5

10

15

20

25

30

35

2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

0

4

-23

2

29

8

-30

-20

-10

0

10

20

30

40

Cumulative

Primary deficit

Real interest

rate

Real GDP

growth

Exch. rate

depreciation

Other flows

Residual

Change in

public debt
UNITED STATES

46 INTERNATIONAL MONETARY FUND

Appendix II. Figure 5. United States: Realism of Baseline Assumptions

Forecast track record 1/ t+1 t+3 t+5 Comparator group:

Public debt to GDP

Primary deficit

r - g Color code:

Exchange rate depreciaton █ > 75th percentile

SFA █ 50-75th percentile

real-time t+3 t+5 █ 25-50th percentile

Historical output gap revisions 2/ █ < 25th percentile

Public Debt Creating Flows Bond Issuances (bars, debt issuances (RHS, 

(Percent of GDP) %GDP); lines, avg marginal interest rates (LHS, percent))

3-Year Debt Reduction 3-Year Adjustment in Cyclically-Adjusted

(Percent of GDP) Primary Balance (percent of GDP)

Fiscal Adjustment and Possible Growth Paths Real GDP Growth

(lines, real growth using multiplier (LHS); bars, fiscal adj. (RHS) (in percent)

Source : IMF Staff.

1/ Projections made in the October and April WEO vintage.

2/ Calculated as the percentile rank of the country's output gap revisions (defined as the difference between real time/period ahead estimates 

 and final estimates in the latest October WEO) in the total distribution of revisions across the data sample.

3/ Data cover annual obervations from 1990 to 2019 for MAC advanced and emerging economies. Percent of sample on vertical axis.

Advanced Economies, NonCommodity Exp., Surveillance

Optimistic

Pessimistic

Commentary: The recovery from COVID-19 will impart complicated effects on the growth path. However, realism analysis does 

not point to major concerns. Although the historical output gap forecast has been consistently optimistic, past forecast errors do 

not reveal any systematic biases and the projected fiscal adjustment and debt reduction are well within norms.

-20

-10

0

10

20

30

40

Past 5

years

Primary deficit

Real interest rate

Real GDP growth

Exch. rate

depreciation

SFA

Change in public

sector debt

-20

-10

0

10

20

30

Next 5

years

0

2

4

6

8

10

12

-7.5-6.5-5.5

-4.5-3.5-2.5-1.5-0.5

0.51.52.5

3.54.55.56.57.5

Distribution 3/

3-year

adjustment

3-year adjustment above 75th 

percentile (2 ppts of GDP)

percentile rank 51

-15

0

15

30

-5

0

5

10

2011 2013 2015 2017 2019 2021 2023 2025 2027

Baseline real growth (lhs)

Baseline real potential growth (lhs)

10-yr avg. real growth (lhs)

Output gap (rhs) -0.4

-0.3

-0.2

-0.1

0

0.1

0.2

-4

-2

0

2

4

6

8

2017 2018 2019 2020 2021 2022 2023 2024

In percentage points of 

GDP

In percent

Baseline

Multiplier=0.5

Multiplier=1

Multiplier=1.5

fiscal adjustment (rhs)

0

4

8

12

16

20

24

28

32

36

-2%

0%

2%

5y hist

202220232024202520262027

5+ yr term

1-5 yr term

<1 yr term

Spread vs 10-yr

US Treas.

Implied spread,

Laubach rule

0

2

4

6

8

10

12

-28-24-20-16-12

-8-4

048

1216

202428

Distribution 3/

3-year change

3-year debt reduction 

above 75th percentile 

(5.9 ppts of GDP)

percentile rank 70
UNITED STATES

INTERNATIONAL MONETARY FUND 47

Appendix II. Figure 6. United States: Medium-term Risk Analysis

Debt fanchart and GFN financeability indexes

(percent of GDP unless otherwise indicated)

Indicator Value

0 25 50 75 100

Fanchart width 46.9 0.7

Probability of debt not stabilizing (pct) 99.7 0.8

Terminal debt level x institutions index 33.0 0.7

Debt fanchart index ... 2.2

Average GFN in baseline 29.6 10.1

Bank claims on government (pct bank assets) 11.5 3.7

Chg. in claims on govt. in stress (pct bank assets) 2.1 0.7

GFN financeability index ... 14.5

Legend: Interquartile range ▌ United States

Final Fanchart (pct of GDP) Gross Financing Needs (pct of GDP)

Banking crisis Commodity prices Exchange rate Contingent liab. Natural disaster

Medium-term Index Medium-term Risk Analysis

(index number)

Prob. of missed crisis, 2022-2027 (if stress not predicted): 27.3 pct

Prob. of false alarm, 2022-2027 (if stress predicted): 10.2 pct.

Low risk 

threshold

High risk 

threhsol

d

Normalized 

level

Weight 

in MTI

Debt fanchart 

index

Medium-term 

index (MTI)

0.5 0.5

GFN 

finaceability 

index

7.6

0.3 ... 0.4, Moderate

2.1

17.9 0.5 0.3

0.4

Commentary: Of the two medium-term tools, the Debt Fanchart Module is pointing to high level of risk, while the GFN 

Financeability Module suggests lower, but still moderate, level of risk. 

Risk 

signal

Risk 

index

...

Module Adv. Econ., Non-Com. Exp, Program

1.1

Debt 

fanchart 

module

GFN 

financeability 

module

Triggered stress tests (stress tests not activated in gray)

...

...

High

...

...

...

Moderate

80

100

120

140

160

180

2017 2019 2021 2023 2025 2027

5-25 pct

25-50 pct

50-75 pct

75-95 pct

Actual

20

70

2017 2019 2021 2023 2025 2027

Financing provided by banks

Actual

Baseline

Stress scenario

0.00

0.10

0.20

0.30

0.40

0.50

2019 2020 2021 2022

Medium-term index

Low risk

High risk
UNITED STATES

48 INTERNATIONAL MONETARY FUND

Appendix III. External Sector Assessment

Overall Assessment: The external position in 2021 was moderately weaker than the level implied by medium-term fundamentals and 

desirable policies. The decline in the trade balance, led by the increase in imports of goods, widened the CA deficit to 3.4 percent of 

GDP. Although uncertainty and terms-of-trade changes caused by the war in Ukraine may affect the near term, the CA deficit is 

projected to decline below 2 percent of GDP over the medium term based on an increase in public saving due to gradual fiscal 

consolidation, reflected in a lower trade deficit.

Potential Policy Responses: Over the medium term, suggested fiscal consolidation aimed at a medium-term general government 

structural primary deficit of about 1 percent of GDP should broadly stabilize the debt-to-GDP ratio and address the CA gap. Structural 

policies to increase competitiveness include upgrading infrastructure; enhancing the schooling, training, and mobility of workers;

supporting the working poor; and implementing policies to increase growth in the labor force (including skill-based immigration 

reform). Tariff barriers should be rolled back, and trade and investment disagreements with other countries should be resolved in a 

manner that supports an open, stable, and transparent global trading system.

Foreign 

Asset/

Liability 

Position 

and 

Trajectory

Background. The NIIP, which averaged about –46 percent of GDP during 2016–19, strengthened slightly from –67.1 

percent of GDP in 2020 to –64.9 percent of GDP in 2021. Under the IMF staff’s baseline scenario, the NIIP is projected to 

remain broadly unchanged through the medium term on the back of developments in portfolio assets and liabilities as 

the CA balance reverts to its pre–COVID-19 average.

Assessment. Financial stability risks could surface in the form of an unexpected decline in foreign demand for U.S. fixed 

income securities, which is a main component of the country’s external liabilities. This risk, which could materialize e.g., 

due to a failure to re-establish fiscal sustainability, remains moderate given the dominant status of the U.S. dollar as a 

reserve currency. Around 60 percent of U.S. assets are in the form of FDI and portfolio equity claims.

2021 (% 

GDP)

NIIP: -64.9 Gross Assets: 65.5 Debt Assets: 17.7 Gross Liab.: 110.1 Debt Liab.: 56.0

Current 

Account

Background. The US CA deficit increased from 2.9 percent of GDP in 2020 to 3.4 percent in 2021 (from 2.7 to 3 percent 

in cyclically adjusted terms), compared with a deficit of 2.1 percent of GDP in 2016. On the trade side, its evolution since 

2016 is explained mostly by deterioration in the non-oil and income balances. In 2021, the trade balance declined 

moderately from 2020 (–3.2 versus –3.7 percent GDP), mostly due to the changes in imports of goods, while the income 

account remained unchanged. Both national saving and investment increased as a percentage of GDP from 2016 to 

2021 (with a massive increase in public dissaving due to the pandemic), resulting in the stated increase in the CA deficit.

The CA deficit is expected to decline slightly below 2 percent of GDP over the medium term.

Assessment. The EBA model estimates a cyclically adjusted CA balance of –3.1 percent of GDP and a cyclically adjusted 

CA norm of –1.2 percent of GDP. The EBA model CA gap is –1.9 percent of GDP for 2020, reflecting policy gaps (–0.8 

percent of GDP, half of which, –0.4 percent, corresponds to fiscal policy) and an unidentified residual (about –1 percent 

of GDP) that may reflect structural factors not included in the model. On balance, the IMF staff assesses the 2021 

cyclically adjusted CA to be 1.1 percent of GDP lower than the level implied by medium-term fundamentals and 

desirable policies, with a range between –1.7 and –0.5 percent of GDP. This assessment includes an IMF staff adjustor of 

0.8 percent GDP to account for the effects of COVID-19 on the travel (0.2 percent of GDP), transport (0.1 percent of 

GDP), and medical (0.1 percent of GDP) balances, as well as the shift in the composition of household consumption (0.4

percent of GDP). The estimated standard error of the CA norm is 0.6 percent of GDP.

2021 (% 

GDP)

CA: 

-3.5

Cycl. Adj. CA: 

-3.1

EBA Norm: 

-1.2

EBA Gap: 

-1.9 

COVID-19 Adj.: 

0.8

Other Adj.:

0.0

Staff Gap:

-1.1

Real 

Exchange 

Rate

Background. After appreciating by 1.6 percent in 2020 (pa), the real effective exchange rate (REER) depreciated by 3.8 

percent in 2021 (pa). The depreciation in 2021 brought the REER to the average level that prevailed in 2016.

Assessment. Indirect estimates of the REER (based on staff’s current account assessment) imply that the exchange rate 

was overvalued by 8.6 percent in 2021 (applying the estimated elasticity of 0.12). The EBA REER index model suggests an 

overvaluation of 2.4 percent, and the EBA REER level model suggests an overvaluation of 9.9 percent. Considering all the 

estimates and their uncertainties, staff assesses the 2021 midpoint REER overvaluation to be 8.6 percent, with a range of 

3.8-13.5 percent, where the range is obtained from the CA account standard error and the corresponding CA elasticity.

Capital 

and 

Financial 

Accounts: 

Flows and 

Policy 

Measures

Background. The financial account balance was about –3.1 percent of GDP in 2020, compared with –3.5 percent of GDP 

in 2020. This was due to a decrease in net direct investment from 0.5 to 0.2 percent GDP, with the changes in portfolio 

investment (–2.3 to –10 percent) and other investments (–1.3 to –2.5 percent) broadly canceling each other out.

Assessment. The US has an open capital account. Vulnerabilities are limited by the dollar’s status as a reserve currency, 

with foreign demand for US Treasury securities supported by the status of the dollar as a reserve currency and, possibly, 

by safe haven flows.

FXI and 

Reserves 

Assessment. The dollar has the status of a global reserve currency. Reserves held by the United States are typically low 

relative to standard metrics. The currency is free floating.
Appendix IV. Implementation of 2020 FSAP Recommendations

FSAP Recommendations Developments Status

Systemic Risk Oversight 

and Macroprudential 

Framework

Provide an explicit financial 

stability mandate to all 

federal FSOC members.

This legislative recommendation has not been 

implemented. 

Not Implemented

Prioritize the development 

of macroprudential tools to 

address risks and 

vulnerabilities in the 

nonbank sector.

In 2021, the Council made it a priority to evaluate and 

address the risks to U.S. financial stability posed by three 

types of nonbank financial institutions: hedge funds, 

open-end funds, and money market funds. At its 

meeting on February 4, 2022, the Council received 

updates from member agency staff on progress over the 

past year regarding these three types of NBFIs through 

working groups and Council member agency 

rulemaking activity. The Council issued a public 

statement highlighting its work. The Council will 

continue to evaluate, monitor, and address these risks to 

financial stability in 2022.

Partially Implemented

Intensify efforts to close 

data gaps, including 

reporting disclosures of 

holdings of collateralized 

loan obligations (CLOs) and 

repo markets, to reinforce 

market discipline.

In February 2019, the OFR promulgated 12 CFR Part 

1610, a rule regarding “Ongoing Data Collection of 

Centrally Cleared Transactions in the U.S. Repurchase 

Agreement Market”. Data collection from private entities 

deemed “covered reporters” began in October 2019. In 

September 2020, the OFR launched its Short-Term 

Funding Monitor, which integrates data collected from 

centrally cleared repo transactions with triparty repo 

transaction data from the New York Federal Reserve 

Bank and other existing data sets previously scattered 

across many sources, into a combined monitor which 

Partially Implemented

INTERNATIONAL MONETARY FUND 49

UNITED STATES
FSAP Recommendations Developments Status

users can download via a public application 

programming interface.

Banking Regulation and 

Supervision

Review prudential 

requirements for non-

internationally active banks 

(Category III and IV) and 

ensure they are and 

continue to be broadly 

consistent with the Basel 

capital framework and 

appropriate concentration 

limits; and consider 

extending the full liquidity 

coverage ratio (LCR) to 

them.

No material developments to report. Implemented

Streamline regulatory 

requirements and consider 

rewriting key prudential 

guidance as regulation.

The Board, FDIC, and OCC are working on a revised 

framework that is intended to produce more robust and 

internationally consistent capital requirements for the 

largest firms, building on improvements made to the 

capital framework following the 2007-09 financial crisis.

Board staff continues to revise or make inactive 

previously issued guidance that has become outdated, 

has been superseded by subsequent guidance or 

regulations, or is no longer relevant to the supervision 

program. In some cases, guidance has been made 

inactive because more comprehensive guidance on the 

topic is available in the examination manuals.

Not Implemented

50

UNITED STATES

INTERNATIONAL MONETARY FUND
FSAP Recommendations Developments Status

Additionally, the Board has published legal 

interpretations regarding several regulations.

Introduce heightened 

standards on the 

governance of large and 

complex bank holding 

companies (BHCs), enhance 

the related-party framework, 

introduce rules on 

concentration risk 

management, and include 

more quantitative standards 

regarding interest rate risk 

in the banking book.

The Board introduced guidance on the governance of 

large and complex BHCs (those with total consolidated 

assets for $100 billion or more). The guidance 

(“Supervisory Guidance on Board of Directors’ 

Effectiveness”) describes the key elements of effective 

boards at such institutions and provides illustrative 

examples of effective board practices.

Partially Implemented 

Insurance Regulation and 

Supervision

Increase independence of 

state insurance regulators, 

with appropriate 

accountability.

It is not substantiated that supervisory independence is 

undermined if commissioners are appointed and/or 

elected. Further, recommended reforms at the state 

government level are beyond the purview of individual 

state insurance departments. The method of 

commissioner selection is determined by the legislatures 

in each state. NAIC has sent this recommendation over 

to NCOIL, NCSL and to the Legislative Liaisons Bulletin 

Board for their awareness.

Not implemented

Require all in-force life 

insurance business be 

moved to principles-based 

reserving (PBR) after a five-

year transition period, adjust 

asset valuation approach to 

It would require a very significant effort for life insurance 

companies to set up PBR modeling for their in-force 

business. PBR applies only to new business for several 

reasons: (1) formulaic reserves are generally conservative 

for in-force life insurance products, and under PBR, 

whole life policies will generally pass exemption tests 

Not implemented

INTERNATIONAL MONETARY FUND 51

UNITED STATES
FSAP Recommendations Developments Status

ensure consistency between 

assets and liabilities, and 

recalibrate risk-based capital

(RBC) to the revised 

valuation approach.

and continue to be valued under the old reserve 

methodology; (2) Term insurance products will move to 

PBR relatively quickly since they have a limited duration 

and will expire; and (3) State law prevents new valuations 

on existing products that have minimum non-forfeiture 

benefits derived at the date of issue of the contract.

Develop a consolidated 

group capital requirement 

similar to GAAP-Plus 

insurance capital standard 

(ICS) for internationally 

active groups and optionally 

for domestic groups in 

parallel with the 

development of aggregation 

approaches by the Board 

and NAIC.

The Federal Reserve Board (the Board) and NAIC 

continue to develop their aggregation approaches, and 

the United States—along with other interested 

jurisdictions—is developing an Aggregation Method at 

the IAIS. The IAIS has developed high-level principles 

and is working to develop criteria to assess whether the 

Aggregation Method provides comparable outcomes to 

the ICS by the end of the monitoring period. No U.S. 

regulator intends to adopt the ICS in its current form.

Not implemented

Regulation, Supervision, 

and Oversight of FMIs

Increase CFTC resources 

devoted to CCP supervision 

and strengthen rule-

approval process to an 

affirmative approval with a 

public consultation.

On December 28, 2020 and March 15, 2022, Congress 

approved additional resources to the CFTC. 

Implemented

Collaborate to analyze 

differences in outcomes of 

CCP risk management 

practices and adopt an 

appropriately consistent, 

conservative

The Board, SEC, and CFTC have implemented regulatory 

frameworks as mandated by Title VIII of the Dodd-Frank 

Act and that are consistent with the PFMI. The 

authorities also continue to actively cooperate, 

coordinate, consult, and collaborate on oversight of 

CCPs, including risk management practices. For example, 

Partially Implemented

52 INTERNATIONAL MONETARY FUND

UNITED STATES
FSAP Recommendations Developments Status

implementation of risk 

conservative management 

standards across CCPs.

the authorities continue to coordinate and collaborate 

on examinations of CCP risk management practices as 

well as on reviews of proposed changes to those 

frameworks, including rulemaking. While acknowledging 

that CCPs operate in different markets, which may 

require different approaches to managing risk, the 

authorities continue to discuss differences in the 

outcomes of risk management practices at CCPs, with 

considerations taken for financial stability and market 

impact.

Develop and execute more 

comprehensive systemwide 

CCP supervisory stress tests.

Preparatory work to conduct a joint supervisory stress 

test of CCPs began in 2019. Progress was temporarily 

delayed to address unprecedented COVID-related 

developments, and more recently, work related to 

geopolitical events, but engagement will resume. During 

the pandemic, the authorities endeavored to address the 

aggregate effect of COVID-volatility, including CCPs. The 

SEC developed a COVID-19 Market Monitoring Group to 

assist in the SEC’s efforts to coordinate with and support 

the COVID-19-related efforts of other federal financial 

agencies and other bodies, including the President’s 

Working Group on Financial Markets (PWG), Financial 

Stability Oversight Council (FSOC) and the Financial 

Stability Board (FSB), among others. The CFTC co-chairs 

an international working group focused on the effects of 

margin demands on the financial system during the 

period of extreme market stress in the early COVID-19

period; the relevant standard-setting bodies published a 

consultative report in late 2021 and is working towards a 

final report for the second half of 2022. In addition, the 

CFTC and the Board participated in an international 

Implemented with regard to 

collaboration and implementation 

of robust risk management 

standards. Partially Implemented to 

reflect continued discussion by 

authorities. 

UNITED STATES

INTERNATIONAL MONETARY FUND 53
FSAP Recommendations Developments Status

working group tasked with analyzing whether global 

CCPs would need additional resources under severe 

default and non-default scenarios; the results of this 

analysis were published by the standard setters in March 

2022, with further work planned internationally. Finally, 

the CFTC led a multi-regulator default drill in 2021 that 

analyzed the preparedness of CCPs for stressed markets 

resulting from the default of a large global financial 

institution; the exercise included over a dozen global 

regulators as well as over a dozen CCP service lines. The 

CFTC is now starting the process of planning for the next 

coordinated default drill, which intends to build on the 

scope of the 2021 exercise. See also U.S. FSAP Technical 

Note: Supervision of Financial Market Infrastructures, 

Resilience of Central Counterparties and Innovative 

Technologies (July 2020) (“FMIs appeared so far 

sufficiently robust to manage surges in volumes and 

volatility in financial markets during the COVID-19 

crisis.”).

Securities Regulation and 

Supervision

Give CFTC and SEC greater 

independence to determine 

their own resources, with 

appropriate accountability.

This legislative recommendation has not been 

implemented.

Not Implemented

Assess financial stability risks 

related to mutual funds and 

stable net asset value (NAV) 

money market funds 

(MMFs), including through 

On December 15, 2021, SEC proposed amendments to 

improve the resilience and transparency of money 

market funds at Proposed rule: Money Market Fund 

Reforms; Conformed to Federal Register version 

(sec.gov).

Partially Implemented

54 INTERNATIONAL MONETARY FUND

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FSAP Recommendations Developments Status

SEC-led liquidity stress 

testing.

SEC’s Fall 2021 Agency Rule List includes a proposed 

rulemaking on Open-End Fund Liquidity and Dilution 

Management at Agency Rule List - Fall 2021 

(reginfo.gov).

Conclude implementation of 

new broker-dealer capital 

rules; finalization of market-

wide circuit breakers, and 

delivery of the Consolidated 

Audit Trail.

Implementation of new broker-dealer capital rules. On 

June 21, 2019, the SEC adopted final rules addressing 

the Title VII requirements for, among other things, 

capital and segregation requirements for broker-dealers; 

the compliance date for this rulemaking was October 6, 

2021 See https://www.sec.gov/news/press-release-2019-

105.

Finalization of market-wide circuit breakers MWCBs. The 

MWCBs were triggered four times in March 2020, 

providing the self-regulatory organizations (SROs) and 

the SEC with an opportunity to assess its performance.

Following completion of an analysis of the MWCBs’ 

operations, the SROs’ MWCB rules were made 

permanent in March and April 2022 without 

modification to how they operate. The SROs, however, 

added requirements relating to testing of the MWCBs 

and identification of circumstances (e.g., a market 

decline that falls just short of triggering a MWCB) that 

warrant review by the SROs and reports to the SEC. See, 

e.g., https://www.sec.gov/rules/sro/nyse/2022/34-

94441.pdf.

Delivery of the Consolidated Audit Trail. The SEC 

charged the SROs with developing and building a 

Consolidated Audit Trail. For information on the SROs’ 

progress, links to the CAT Implementation Plan, which 

Fully Implemented

Fully Implemented

Partially Implemented

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INTERNATIONAL MONETARY FUND 55
FSAP Recommendations Developments Status

was filed with the Commission on July 22, 2020, as well 

as the quarterly progress reports QPRs see 

https://www.catnmsplan.com/implementation-plan.

Increase scrutiny of new 

registrants and reduce 

reliance on self-attestations 

where applicable.

Whether a registered investment adviser is a newly 

registered firm is one of the risk factors that the SEC 

Division of Examinations considers in selecting firms for 

examination.

Newly CFTC registered commodity pool operators 

(CPOs) immediately become eligible for examination by 

the NFA utilizing NFA's risk assessment/model function.

There are a number of factors that, if present, may result 

in a newly registered CPO being scheduled for 

examination including background of firm personnel.

Partially Implemented

AML/CFT

Legislate to collect beneficial 

ownership information on 

formation of U.S. 

corporations, maintain it, 

and ensure timely access for 

authorities.

The AML Act of 2020, which includes the Corporate 

Transparency Act, was enacted on January 1, 2021, and 

requires that reporting companies disclose their 

beneficial owners when they are formed (or, for non-U.S. 

companies, when they register with a State to do 

business in the U.S.), and when they change beneficial 

owners.

Implemented

Ensure that investment 

advisers, lawyers, 

accountants, and company 

service providers are 

effectively regulated and 

supervised for AML/CFT in 

line with risks.

The FATF most recently assessed the United States’ 

progress on these action items as a part of the Third 

Follow-Up to the U.S. Mutual Evaluation. The United 

States will continue to engage with the FATF on 

addressing the gaps identified in that assessment.

https://www.fatf-

gafi.org/media/fatf/documents/reports/fur/Follow-Up-

Report-United-States-March-2020.pdf

Partially Implemented

56 INTERNATIONAL MONETARY FUND

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FSAP Recommendations Developments Status

Systemic Liquidity

Promote the fungibility of 

Treasury Securities and 

Reserves by adjusting 

assumptions about firms’ 

access to the Discount 

Window in liquidity metrics.

No changes have been made since the FSAP was 

conducted.

Not Implemented

Continue to operate regular 

fine-tuning OMOs.

In the current operating environment, in which reserves 

are in excess of $3 trillion, no fine-tuning or reserve 

management OMOs are needed.

Implemented

Advance arrangements for 

providing liquidity to 

systemic nonbanks and 

CCPs under stress, and 

reconsider restrictions on 

bilateral emergency liquidity 

assistance (ELA) to 

designated systemically 

important nonbanks.

No changes have been made since the FSAP was 

conducted.

The Federal Reserve has the ability to provide liquidity to 

systemic nonbanks under stress through broad-based 

liquidity facilities under Section 13(3) of the Federal 

Reserve Act. In addition, for a CCP that the FSOC has 

designated as systemically important, the Federal Reserve 

is authorized to provide liquidity on a bilateral basis in 

unusual or exigent circumstances (among other 

restrictions). (The recommendation to reconsider 

restrictions on bilateral emergency liquidity assistance to 

systemic nonbanks should be directed to Congress.)

Not Implemented

Develop robust and 

effective backup plans in the 

event the sole provider, 

Bank of New York Mellon 

(BNYM), is not able to settle 

and clear repo transactions.

The Federal Reserve continues to engage with market 

participants on the development of robust plans in the 

event that BNYM is not able to settle and clear repo 

transactions, including at an industry level. Market 

participants continue to offer widespread interest and 

support for this effort. The Federal Reserve continues 

discussions in order to develop and implement these 

plans.

Partially Implemented

INTERNATIONAL MONETARY FUND 57

UNITED STATES
FSAP Recommendations Developments Status

Enhance arrangements to 

provide liquidity support in 

foreign currencies to banks 

and designated systemically 

important CCPs.

No changes have been made since the FSAP was 

conducted.

Not Implemented

Crisis Preparedness and 

Management

Intensify crisis preparedness. FSOC plays an important role in promoting information 

sharing and collaboration to address potential risks to 

financial stability. When the Council discusses potential 

responses to mitigate potential risks to financial stability, 

it seeks to collaborate regarding agencies’ crisis-

management planning and tools that are relevant to 

those risks.

Partially Implemented

Continue to use agency 

discretion actively to subject 

a wider array of firms to 

RRP.

Through operation of the revised resolution plan rule 

issued by the FDIC and Board in 2019, several firms have 

become subject to the Title I resolution plan 

requirement since the effective date of the rule.

Partially Implemented

Continue to undertake, at 

least yearly, Dodd-Frank Act 

(DFA) Title II plans, 

resolvability assessments, 

and crisis management 

group (CMG) discussions of 

RRPs and assessments.

The FBAs continue to review RRPs submitted by firms 

with an increasing focus on testing a range of firms’ 

capabilities that support resiliency, recoverability, and 

resolvability.

The FDIC and the Board also continue to co-chair annual 

Crisis Management Group (CMG) meetings for U.S. G-

SIBs, with the participation of the OCC and SEC, as 

applicable, and relevant host authorities, to discuss 

home-and-host resolvability assessments for the firms to 

facilitate cross-border resolution planning.

Implemented

58 INTERNATIONAL MONETARY FUND

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FSAP Recommendations Developments Status

Further, the FDIC has undertaken institution-specific 

strategic planning to carry out its orderly liquidation 

authorities with respect to the largest G-SIBs operating 

in the United States. The FDIC continues to build out 

process documents to facilitate the implementation of 

the framework in a Title II resolution.

Extend OLA powers to cover 

FBOs’ U.S. branches; ensure 

equal depositor preference 

ranking for overseas branch 

deposits with domestic 

deposits; introduce powers 

to give prompt and 

predictable legal effect to 

foreign resolution measures.

This legislative recommendation has not been 

implemented. 

Not Implemented

This assessment was prepared by the U.S. authorities for the purposes of the IMF’s Article IV review and is non-binding, informal, and summary 

in nature. The updates contained herein do not represent rules, regulations, interpretations, or official statements of the U.S. authorities.

INTERNATIONAL MONETARY FUND 59

UNITED STATES
UNITED STATES

STAFF REPORT FOR THE 2022 ARTICLE IV CONSULTATION—

INFORMATIONAL ANNEX

Prepared By The Western Hemisphere Department (in consultation with 

other departments)

FUND RELATIONS ________________________________________________________________________2

STATISTICAL ISSUES______________________________________________________________________4

CONTENTS

June 24, 2022
UNITED STATES

2 INTERNATIONAL MONETARY FUND

FUND RELATIONS

(As of June 13, 2022)

Membership Status: Joined: December 27, 1945; Article VIII

General Resources Account: SDR Million

Percent 

of Quota

Quota 82,994.20 100.00

IMF's Holdings of Currency (Holdings Rate) 58,289.69 70.23

Reserve Tranche Position 24,757.54 29.83

Lending to the Fund

New Arrangements to Borrow 383.33

SDR Department: SDR Million

Percent of 

Allocation

Net cumulative allocation 114,861.89 100.00

Holdings 118,342.72 103.03

Outstanding Purchases and Loans: None

Financial Arrangements: None

Projected Payments to Fund 1/

(SDR Million; based on existing use of resources and present holdings of SDRs):

Forthcoming

2022 2023 2024 2025 2026

Principal

Charges/Interest 1.47 1.47 1.47 1.47

Total 1.47 1.47 1.47 1.47

1/ When a member has overdue financial obligations outstanding for more than three months, the 

amount of such arrears will be shown in this section.

Exchange Rate Arrangements. The exchange rate of the U.S. dollar floats independently and is 

determined freely in the foreign exchange market. The United States has accepted the obligations 

under Article VIII, Sections 2(a), 3 and 4 of the IMF's Articles of Agreement and maintains an

exchange system free of multiple currency practices and restrictions on the making of payments and 

transfers for current international transactions, except for those measures imposed for security 

reasons. The United States notifies the maintenance of measures imposed for security reasons under 

Executive Board Decision No. 144–(52/51). The last of these notifications was made on April 21, 

2022.
UNITED STATES

INTERNATIONAL MONETARY FUND 3

Article IV Consultation. The 2022 Article IV consultation was concluded on July 11, 2022 and the 

Staff Report was published as IMF Country Report No. [22/xxx]. A fiscal Report of Observance of 

Standards and Codes was completed in the context of the 2003 consultation. The 2022 Article IV 

discussions took place during May 31–June 15, 2022. Concluding meetings with Chair Powell of the 

Board of Governors of the Federal Reserve System, and Treasury Secretary Yellen occurred on June 

23-24. The Managing Director, Ms. Georgieva, and Deputy Managing Director Li participated in the 

concluding meetings. A press conference on the consultation was held on June 27, 2022. The team 

comprised Nigel Chalk (head), Laila Azoor, Katharina Bergant, Moya Chin, Andrew Hodge, Li Lin, Rui 

Mano, Andrea Medici, Anke Weber (all WHD), Martin Stuermer (RES), Mico Mrkaic and Elizabeth Van 

Heuvelen (SPR). Ms. Elizabeth Shortino (Acting Executive Director) and Mr. Logan Sturm (Advisor) 

attended some of the meetings. Outreach included discussions with the U.S. Chamber of Commerce, 

private sector representatives, and think tanks. Unless an objection from the authorities of the 

United States is received prior to the conclusion of the Board’s consideration, the document will be 

published.
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4 INTERNATIONAL MONETARY FUND

STATISTICAL ISSUES

As of June 13, 2022

I. Assessment of Data Adequacy for Surveillance

General: Comprehensive economic data are available for the United States on a timely basis. Data 

provision is adequate for surveillance, including its coverage, periodicity, and timeliness. 

II. Data Standards and Quality

The United States is an adherent to the Special 

Data Dissemination Standard Plus (SDDS Plus) 

since February 18, 2015, and its metadata are 

posted on the Dissemination Standards Bulletin 

Board (DSBB). The United States’ latest SDDS 

Plus Annual Observance Report is available on 

the DSBB.

No data ROSC has been conducted.
UNITED STATES

INTERNATIONAL MONETARY FUND 5

Table 1. United States: Table of Common Indicators Required for Surveillance

(As of June 27, 2022)

Date of 

latest 

observation

Date 

received

Frequency 

of data1

Frequency of 

reporting1

Frequency of 

publication1

Exchange rates Same day Same day D D D

International reserve assets and reserve 

liabilities of the monetary authorities2

2022 M4 May 31 M M M

Reserve/base money 2022 M5 Jun 22 M M M

Broad money 2022 M5 Jun 22 M M M

Central bank balance sheet Jun 22 Jun 22 W W W

Consolidated balance sheet of the 

banking system

2022 Q1 Jun 11 Q Q Q

Interest rates3 Same day Same day D D D

Consumer price index 2022 M5 Jun 10 M M M

Revenue, expenditure, balance and 

composition of financing4—general 

government5

2022 Q1 Jun 24 Q Q Q

Revenue, expenditure, balance and 

composition of financing4—central 

government

2022 M5 Jun 10 M M M

Stocks of central government and central 

government-guaranteed debt

2022 M6 Jun 30 M M M

External current account balance 2022 Q1 Jun 23 Q Q Q

Exports and imports of goods and 

services

2022 M4 Jun 7 M M M

GDP/GNP (1st release) 2022 Q1 Apr 29 Q M M

Gross External Debt 2021 Q4 Mar 31 Q Q Q

International Investment Position6 2021 Q4 Mar 29 Q Q Q

1 Daily (D), Weekly (W), Biweekly (B), Monthly (M), Quarterly (Q), Annually (A); NA: Not Available.

2 Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

3 Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, 

notes and bonds.

4 Foreign, domestic bank, and domestic nonbank financing.

5 The general government consists of the central government (budgetary funds, extra budgetary funds, and social 

security funds) and state and local governments.

6 Includes external gross financial asset and liability positions vis-à-vis nonresidents.
UNITED STATES

STAFF REPORT FOR THE 2022 ARTICLE IV CONSULTATION 

—SUPPLEMENTARY INFORMATION

Prepared By Western Hemisphere Department

This statement provides an update on developments since the issuance of the staff report 

to the Executive Board on June 27, 2022. The update does not change the thrust of the 

staff appraisal.

1. Data. New data was released on June 29–30 to update the estimates of first 

quarter GDP and to provide new data on personal income and consumption for May. 

The highlights from the two reports were

• Personal consumption expenditure was considerably weaker in the first few months 

of the year than previously thought. The level of consumption in April was revised 

down by 0.8 percent (with a 1.5 percent reduction in durable goods consumption 

and smaller reductions in demand for services and nondurables). This implied a 

higher household saving rate during the first four months of the year.

• Personal consumption expenditure contracted in May by 0.4 percent (relative to the 

revised April outturn). There was a particularly large (3.5 percent) reduction in the 

demand for durables relative to that in April.

• The composition of first quarter GDP was revised to reflect the lower real growth in 

consumption (which fell from 3.1 to 1.8 percent) and a smaller decumulation of 

nonfarm inventories.

• In May, headline PCE inflation was 0.6 percent (6.3 percent year-on-year). Core PCE 

inflation was 0.3 percent (falling to 4.7 percent year-on-year), somewhat lower than 

was forecast by staff. Median PCE inflation rose to 0.6 percent (or 4.8 percent yearon-year).

2. Implications for outlook. The data revisions and new data for May indicate 

significantly less momentum in private consumption and a smaller deployment of the 

household savings that had been accumulated over the past two years. This suggests 

the economy is experiencing a more front-loaded deceleration with a drawdown of 

savings less supportive of demand during the remainder of this year. As such, staff have

July 5, 2022
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2 INTERNATIONAL MONETARY FUND

• Revised down growth for 2022 from 2.2 to 1.0 percent Q4/Q4. This is expected to reduce the 

annual average growth rate from 2.9 to 2.3 percent in 2022 and from 1.7 to 1.0 percent in 2023.

• Modestly lowered core PCE inflation in 2022 (from 4.6 to 4.4 percent Q4/Q4).

Table 1 summarizes the revisions in the forecast.
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INTERNATIONAL MONETARY FUND 3

Table 1. United States: Selected Economic Indicators

(Percentage change from previous period, unless otherwise indicated)
1

Statement by Ms. Shortino, Executive Director, Ms. Medearis, and Mr. Sturm on

United States

July 11, 2022

We thank staff for their constructive and deliberate engagement with our authorities at a

particularly uncertain time for the global economy. We welcome staff’s analysis and policy

advice in the staff report.

The United States has experienced a strong economic recovery, supported by historic 

economic and health measures by the U.S. government, following the shock of COVID-19.

A robust U.S. economy has in turn provided a boost to global growth. Notably, the American

Rescue Plan (ARP), signed into law in 2021, played a central role in restoring growth, protecting

the most vulnerable households, and mitigating potential economic scarring that we saw in

previous economic shocks. As a result, the U.S. economy grew by 5.7 percent in 2021, the fastest

pace in nearly four decades. Moreover, our national vaccination effort continues with safe and

effective vaccines now available for children under 5 years of age. We are continuing to take

strides to further improve vaccine efficacy against new strains and to increase the availability of

life-saving therapeutics.

The Administration expects growth to be largely in line with the IMF forecast of around 2

percent in 2022, and 1 percent for 2023. Aggregate demand has surprised firms and far

outstripped already strained supply chains. While the labor market has recovered, the labor force

participation rate has lagged, particularly for those over 55 years of age. Firms added 2.4 million

jobs in the first five months of 2022, and the unemployment rate is holding just above the 3.5

percent, five-decade low reached in late 2019 and early 2020. Jobless claims are also hovering

near record lows.

The United States is well positioned to respond to unacceptably high inflation, and

restoring price stability is a top priority for our authorities. Inflation has risen in the United

States and many other economies due to strong demand pressures and various supply constraints,

which have been exacerbated by the impact of Russia’s war against Ukraine on food and

commodity prices. The first and most important defense against inflation is a strong and

independent Federal Reserve. Steps to reduce supply side constraints and to make our supply

chains more resilient represent an important complement to monetary policy actions by the

Federal Reserve. The Administration is pushing forward an energy agenda designed to diminish

our reliance on fossil fuels and help energy security through a transition to clean energy sources,

which will create greater resilience against global shocks like Russia’s war in Ukraine and lower

costs for American consumers and businesses. The Administration continues to engage with

Congress on its Build Back Better agenda and remains hopeful that a version of the

reconciliation bill that has passed the House of Representatives will become law. These measures

will help to reduce supply side constraints, including boosting labor supply, at an important

juncture and contribute to lower costs for household expenditures like prescription drugs and

childcare.

The Administration has also made fighting climate change and reversing longstanding

structural racial and economic inequality top priorities. The Bipartisan Infrastructure Law
2

(BIL) will help improve the country’s electric grid, incentivize and accelerate the switch to

electric vehicles, and reduce methane emissions. The Administration recognizes the need to do

more on climate, including through legislative action. The Administration has taken wide

ranging actions to incorporate equity considerations in the recovery and promote further public

investment in underserved communities. The ARP reached communities with the most serious

challenges, including through rental assistance programs, outreach to raise awareness of benefits,

and state and local funds to meet the needs of vulnerable communities.

Fiscal Policy: Preventing scarring, Making growth more equitable and greener

The United States deployed unprecedented fiscal support through the ARP to secure the recovery

and protect the most vulnerable households and made historic investments in a greener future

through the BIL. U.S. fiscal policy helped not only to insure against tail risks amid high

uncertainty but also applied the lessons from past crises against dire baseline projections in 2020.

Targeted fiscal measures prevented scarring, foreclosures, bankruptcies, and human suffering.

The Administration strove to target the ARP to help low-and-middle- income households,

including through the child tax credit. As a result, household balance sheets are healthy, and the

support provided a bridge to allow families to secure new employment, pay down debt, and in

general enter the post-pandemic workforce with their finances intact. Strong household and

business balance sheets will contribute to growth going forward, and the Administration remains

focused on sustainable, inclusive, and green growth.

The Administration aims to build a fair and stable tax system that is more equitable and efficient,

promotes growth, and raises revenues to both adequately fund investments and to reduce deficits

and debt. The Administration is making a strong case for additional resources to modernize the

Internal Revenue Service, which will help to enforce existing tax laws and to close the tax gap in

the United States. Internationally, the Administration is keenly focused on moving forward on

the global agreement on international tax reform, including a global minimum tax that will level

the playing field and raise crucial revenues to benefit people around the world. These agreements

will ensure that corporations fairly share the burden of financing government and end the global

race to the bottom in corporate taxation. The Administration remains committed to tax reforms,

including tax credits, that will shift incentives away from fossil fuels toward renewable energy

sources and to support higher labor force participation, especially amongst women.

Monetary Policy

In response to the pandemic, the Federal Reserve deployed all its tools to support the U.S.

economy, thereby promoting its maximum employment and price stability goals. In less than two

years, employment is now rapidly approaching its pre-pandemic level amid ongoing supply side

constraints, including lagging labor force participation. With the swift recovery in employment

and the sharp increase in inflation, the Federal Reserve is committed to moving expeditiously to

keep the anchor of price stability. In recent months, our authorities have significantly tightened

financial conditions through a well-choreographed pivot to monetary policy tightening. The

initial pivot has been followed by decisive, data-dependent, and historically large policy rate

increases, including the 75 basis point hike taken on June 15 as well as the initiation of a rapid

reduction in the size of the Federal Reserve’s balance sheet.
3

The Administration expects a pathway to address inflation without a recession. In this regard, we

agree with staff’s baseline assessment. Despite extraordinarily strong aggregate demand across a

range of sectors, aggregate supply in many sectors has been relatively inelastic. Essentially

vertical or near vertical supply dynamics continue to interact with very strong demand across

many sectors of the economy. It is critical that economic conditions support nascent and

potential supply responses. As supply responds with easing supply chain bottlenecks, increased

labor supply, and rebalancing of demand between goods and services, inflationary pressures will

ease.

The current tightening cycle is clouded by risks, including tail risks, and uncertainty especially

regarding resolution of supply side constraints. Staff rightly note the risks from further shocks

related to the pandemic, China lockdowns, and Russia’s war against Ukraine, which would have

an acute impact on supplies of durable goods and commodities. The rapid upswing in inflation is

not unique to the United States or other advanced economies, but further complicates policy

responses to these risks. With policy tightening occurring in many jurisdictions, we note that the

likelihood of negative surprises or spillovers should not be discounted.

The policy shift from pandemic-era accommodation to tightening has been well communicated.

Our authorities remain keenly attuned to the public’s interest in the pace and trajectory of U.S.

monetary policy. The FOMC closely monitors global economic and financial developments and

their implications for domestic economic activity, labor markets, and inflation. The Federal

Reserve finds its existing communication tools to be effective and will continue to use its

extensive communication tools to maximum effect to make sure that its policy intentions,

including for the path of the policy rate, are well understood by market participants, the public,

and by international counterparts.

Financial Stability

The U.S. financial system has remained resilient in the context of multiple shocks over the past

two years. Thus far, our authorities have noted very limited direct exposure to financial

spillovers from Russia’s war against Ukraine. U.S. banks throughout the pandemic have shown

little signs of systemic risks across a range of capital and liquidity metrics. Our authorities are

well aware of the risks posed by rising interest rates and ongoing challenges in certain sectors

like the commercial real estate market. To date, disciplined underwriting of residential mortgages

and still vigorous housing market growth have supported financial sector stability unlike during

previous crises.

U.S. authorities are seeking ways to mitigate potential risks associated with nonbank financial

institutions (NBFIs) and with digital assets while carefully monitoring market functioning. The

Financial Stability Oversight Council (FSOC) continues to take a well- coordinated approach to

addressing these financial stability risks. The Federal Reserve established two new facilities that

can help to maintain the smooth functioning of financial markets in response to future shocks.

The first is the Standing Repurchase Agreement (repo) Facility, which serves as a backstop in

money markets to support the effective implementation of monetary policy. The other is the

FIMA Repo facility, which is available to approved central banks and monetary authorities with

accounts at the Federal Reserve Bank of New York.
4

Climate Change

Addressing the massive global threat from climate change is an Administration priority. We

welcome additional Fund analysis and recommendations on a green jobs transition. We continue

to see multiple pathways to achieve our Nationally Determined Contributions through regulatory

action, inter-agency initiatives, new standards, and, importantly, Congressional action. The BIL

contained key investments for carbon capture, hydrogen energy development, reclaiming

abandoned mine lands, and upgrades to the national electricity grid. Additionally, the

Administration remains committed to working with Congress to pass legislation that will build

on our initial down payment toward a greener future through the BIL and meet our full ambitions

on climate change.

The Administration has made extensive progress on our climate agenda through executive actions

that will make important contributions to achieving the U.S. NDC. These actions include

Defense Production Act authorization for clean energy manufacturing, a Methane Emissions

Reduction Action Plan, new lease sales for offshore wind, and strong passenger vehicle fuel

economy standards. The Administration’s leadership on climate is complemented by voluntary

U.S. private sector climate and sustainability commitments that will support further progress.

We note the alignment between Fund analysis on the green transition and the Administration’s

place-based policies which will support communities adversely affected by globalization and

climate change. The Administration is focused on supporting these communities through dozens

of pilot projects to tailor assistance to local needs and development aspirations. In this context,

we highlight the Commerce Department’s $3 billion program under the ARP, which will support

workforce development in underserved communities tied to firms’ needs while improving

infrastructure including broadband internet access. Likewise, the Justice 40 initiative aims to

channel additional resources to vulnerable communities with a goal of investing 40 percent of

key programs, $29 billion thus far in 2021–22, into these historically marginalized, underserved

and/or pollution-burdened communities.

The Administration, through the FSOC, is making strides to improve financial sector climate

resiliency. The FSOC published a report last year identifying climate change as an emerging

threat to U.S. financial stability. The report included over 30 recommendations to U.S. financial

regulators to help assess and address climate-related financial risks. Those recommendations

encourage financial regulators to take action to expand capacity, improve data and measurement,

enhance disclosure of climate-related risks, assess the scale of climate vulnerabilities, and make

appropriate adjustments in regulatory and supervisory tools. The FSOC established a new stafflevel committee to provide a venue to help promote information sharing and facilitate efforts to 

address climate-related financial risks. FSOC members have made important progress since the 

report was issued. The Office of the Comptroller of the Currency and the Federal Deposit 

Insurance Corporation, for example, each issued principles for climate-related financial risk 

management for large banking institutions. The U.S. Securities and Exchange Commission also

issued a proposal to enhance and standardize climate-related disclosures for investors.
5

International Context

The U.S. economic recovery has had positive economic spillovers and boosted the global

economic recovery from the pandemic. The United States remains committed to supporting

developing countries in their fight against the pandemic and the rising threat of food insecurity,

exacerbated by Russia’s war against Ukraine. To date, the United States has pledged to donate at

least 1.1 billion doses of COVID-19 vaccines before 2023 and has already delivered about half

of this amount.

The pandemic and the uneven global recovery have had significant effects on the U.S. external

position. The U.S. current account deficit has widened in the near term as a result of the strong

growth in United States relative to our major trading partners. Going forward, it will be

important for the rest of the world to do its part in supporting global aggregate demand while

balancing inflation pressures. Countries with persistent, excessive current account surpluses must

find ways to support domestic demand. Flexibility in exchange rates and avoidance of excess

reserve accumulation will be critical to reducing global imbalances.

The Administration’s trade policy aims to ensure inclusive, equitable, and worker-centered

growth, while also securing the resilience of supply chains. This is in parallel with our domestic

efforts to improve standards of living, ensure full employment, and promote sustainable

development. However, unfair competition by other countries, including non- market policies as

well as exploitation of workers and the environment, continue to undermine U.S. interests and a

fair international trading system. The Administration is committed to defending U.S. citizens,

workers, and businesses from unfair practices of non- market economies and resulting global

economic distortions. The Administration is also considering a reform agenda at the WTO to

address these issues, as well as enhancing compliance and transparency.

Spillovers from Russia’s war against Ukraine have had an extraordinary negative impact on the

global economy. We remain acutely aware of human suffering from the war and remain

committed to limiting the suffering in Ukraine and those affected by spillovers from Russia’s

war. In response, the United States is working with its allies, partners, and the international

financial institutions to respond these additional crises. For example, we are committed to

working with partners to address the rising global food insecurity crisis, including through the

Administration’s Feed the Future initiative. We remain firmly committed to cooperating

multilaterally to address these and other pressing global challenges.