Yeliz Akmaca 
The latest IMF Article IV review highlights that the US federal budget deficits, projected at 7–8% of GDP, and consolidated debt, expected to reach 140% of GDP by 2031, pose growing stability risks. This essentially explains why interest rates are likely to stay high for longer, limiting aggressive rate cuts. The fund describes the current account deficit as “very large” and suggests spending cuts over tariffs to correct trade imbalances; meaning short-term capital inflows remain constrained.
President Trump, in his State of the Union address, praised falling mortgage rates and claimed annual costs have dropped by around $5,000. Here, IMF data confirms that despite optimism, rates will remain elevated.
When will US inflation decline?
US inflation is expected to reach the Fed’s 2% target only by early 2027, restricting the likelihood of aggressive rate cuts in the near term.
How Budget Deficits Affect Markets
IMF Managing Director Kristalina Georgieva said the US current account deficit is projected at 3.5–4% of GDP in the short term. The fund emphasizes that fiscal consolidation, not tariffs alone, is the best way to reduce the budget gap.
Why does Trump’s low-rate optimism clash with reality? Structural spending and persistent deficits create a long-term rationale for high interest rates, meaning short-term mortgage declines do not resolve underlying issues.
Federal budget deficits of 7–8% and consolidated debt rising to 140% by 2031 increase instability risks for both the US and the global economy. Of course, short-term optimism exists, but the structural picture remains unchanged.
Trump’s Optimism vs Structural Reality
Trump framed low rates as solving the housing problem, citing the lowest mortgage costs in four years. However, IMF data tells a different story: inflation won’t hit the Fed’s target until 2027, and deficits are twice the administration’s own targets, reinforcing the case for long-term elevated rates.
Will the Fed cut rates?
Given structural risks and high deficits, rates are expected to stay elevated for an extended period, leaving little room for emergency cuts. The fund set 2026 growth at 2.4%, leaving no urgent reason for rate reductions. Short-term market optimism clashes with this structural reality.
Implications for Crypto
Effects on risky assets are clear. Sticky inflation and widening deficits reduce the likelihood of aggressive rate cuts, reinforcing caution in crypto markets. Short-term capital flow and trading volumes must shift before rates could fall rapidly.
In short, US inflation won’t meet the Fed target until 2027, while deficits and debt remain high. Trump’s low-rate expectations clash with reality, and structural risks dominate. Of course, data shifts could create short-term opportunities, but the macro picture keeps rates elevated for the foreseeable future.
US inflation won’t reach the Fed’s 2% target until 2027. IMF warns that persistent deficits and rising debt limit near-term rate cuts, keeping crypto markets cautious.
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