Pierre-Olivier Gourinchas, the chief economist of the International Monetary Fund (IMF), has warned that President-elect Donald Trump’s economic proposals could reignite inflation in the United States.
Speaking to AFP just days before Trump’s return to the White House, Gourinchas highlighted concerns over Trump’s plans to increase tariffs and restrict immigration, which could constrain the supply side of the economy and drive up prices.
Gourinchas also noted that other proposals by Trump, such as reducing regulations and cutting taxes, could further fuel inflation by boosting demand. “The bottom line is that when we assess the risk for the US, we see an upside risk on inflation,” he said.
The economist’s comments came ahead of the IMF’s key World Economic Outlook (WEO) report, which did not incorporate Trump’s proposals due to policy uncertainty. The IMF raised its forecast for global growth and significantly upgraded its outlook for the US economy in the WEO update.
While many economists view Trump’s tariff and immigration plans as inflationary, Trump and his advisors argue that the overall policy package will help stabilize prices. Traders have scaled back their expectations for rate cuts by the US Federal Reserve in 2025, with data from CME Group indicating an 80 percent probability that no more than two quarter-point rate cuts will occur this year.
Gourinchas said the IMF anticipates the Fed will lower rates by half a percentage point in both 2025 and 2026, aligning with the median forecast from Fed officials surveyed in December.
In contrast, the outlook for China, the world’s second-largest economy, presents a different picture. China is grappling with a property sector crisis and growing uncertainty regarding global trade policies. The IMF projects China’s growth will continue to slow, though recent fiscal support measures introduced by the government may mitigate the decline.
“If you look at China, the concern is the potential for entering a deflationary regime, exacerbated by the worsening property sector crisis,” Gourinchas explained. “In terms of policies, we believe the Chinese authorities are moving in the right direction, but there is room to do more,” he added.
