Why Inflation Won’t Drop until 2027 – The Fed’s Pathetic Wait

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Good news, folks: the IMF has decided that US inflation will only see the light of day again once the Fed’s two‑percent target cold‑sweats in 2027. Because apparently, time is the only thing that can work miracles.

In a stroke of bureaucratic brilliance, the IMF announced this on a Wednesday that was less about economic forecasts and more about playing long‑form reality TV with Trump’s dreams of a “rating paradise.”

IMF Flags Fiscal Risks

Kristalina Georgieva, the Fund’s name‑dropping managing director, told reporters that the U.S. current‑account deficit is “too big,” roughly 3.5% to 4% of GDP-a figure that would make your grandmother’s sock drawer look small.

Nigel Chalk, the Fund’s Western Hemisphere director (who apparently knows what “tax‑capped storms” are), insisted that fiscal consolidation-not a rash of tariffs-is the ticket to making the deficit less of a global insult. The recommendation came after the Supreme Court waved away Trump’s broad emergency tariffs, leaving the administration to stumble over Section 122 of the 1974 Trade Act.

The fiscal outlook is bleak: the IMF believes federal deficits will hover between 7% and 8% of GDP for the next few years, more than double the levels that Treasury Secretary Scott Bessent swears are “reasonable.” Debt is on a steady climb, poised to hit 140% of GDP by 2031-because what could go wrong?

“The upward path for the public debt‑GDP ratio and increasing levels of short‑term debt‑GDP represent a growing stability risk to the US and global economy,” warned the Fund.

Trump’s Rate Optimism vs. Structural Reality

Just after another State of the Union where Trump painted the nation in rosy, mortgage‑rate‑low hues, claiming rates had slid to “four‑year lows” and that average borrowers were saving nearly $5,000 a year-a headline that would make Mrs. Philips’ knitting club proud-the IMF politely reminded everyone that inflation isn’t duet‑ing with the Fed’s target until 2027.

Meanwhile, the U.S. growth forecast for 2026 sits at a “resilient” 2.4%, leaving the Fed with little reason to feel the need to ease. It’s a subtle reminder that sometimes flashy campaign slogans just don’t calculate.

What It Means for Crypto

Risk assets have a clear message: sticky inflation and a tax‑and‑spend juggernaut slash the odds of rate cuts this year. For crypto, which had cheered late‑2025 on the scent of easing, the IMF’s verdict is a sobering reality check.

The most delicious irony? The very fat fiscal expansion Trump champions-those historically large tax cuts the IMF highlighted-are the main culprits that keep rates high. Trump desires cheap money, but he’s destroying the plumbing that would allow it to flow.

While the IMF refrained from predicting a crisis, noting that “the risk of sovereign stress in the US is low,” the path it spells out is unmistakable: rising debt, relentless deficits, and a sluggish march of disinflation means any rate relief is likely to take a holiday in 2027 and stay there.

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2026-02-26 04:06