IMF Latest Report: Inflation Target May Be Delayed Until 2027, High-Interest Rate Cycle and New Pattern for Risk Assets Analysis

On February 25, 2026, the International Monetary Fund (IMF) released its fourth review of the U.S. economy, which cast a cold shower on the market’s previous optimistic expectations for rate cuts. The IMF explicitly warned that U.S. inflation needs to fall back to the Federal Reserve’s 2% long-term target by early 2027, meaning the highly anticipated easing cycle will be pushed further into the future. This conclusion not only contrasts sharply with the optimistic rate cut scenario depicted by Trump in his State of the Union address but also sent a deep water bomb into global capital markets, especially the crypto industry, which is highly sensitive to macro liquidity. Since the report’s release, market data shows Bitcoin (BTC) fluctuating around $68,251.20, up 5.20% in 24 hours, but most believe this volatility is more a correction of previous oversold conditions rather than a sign of a trend reversal.

Event Overview: A Delayed Inflation Achievement Timeline

In its latest annual review, the IMF clearly states that due to sticky core inflation and a persistently tight labor market, the U.S. core Personal Consumption Expenditures (PCE) inflation rate is not expected to stabilize near the Fed’s 2% target until early 2027. This timing is later than many financial institutions’ previous forecasts. Based on this assessment, the IMF believes the Fed will have limited room for further rate cuts in the coming year, predicting that by the end of 2026, the federal funds rate will gently decline to a range of 3.25% to 3.5%. This essentially negates the market’s earlier narrative of “aggressive rate cuts,” reinforcing a macro scenario of “higher for longer” interest rates.

Background and Timeline: Structural Dilemma of Deficit-Driven Growth

The report’s release is set against the backdrop of a critical policy battle during the early days of Trump’s new administration. Just a day before the report, Trump emphasized in his State of the Union address that mortgage rates had fallen to historic lows, signaling easing economic pressures. However, the IMF’s analysis points directly to the structural root problem: unsustainable fiscal expansion.

The data sketches a clear timeline and causal chain:

• 2025: The Fed has already cut rates three times, beginning to price in an easing cycle.
• 2026: The IMF forecasts U.S. real GDP growth at 2.4%, with unemployment dropping to 4.1%, indicating strong economic resilience. However, the federal fiscal deficit will remain at 7-8% of GDP, more than double the Treasury Secretary’s target.
• Early 2027: Inflation is expected to meet targets, but later than previously anticipated.
• 2031: U.S. government total debt-to-GDP ratio is projected to rise to 140%.

This massive fiscal stimulus—including historic tax cuts—supports short-term economic growth but also blocks the path for inflation to fall back, becoming the core constraint on rate cuts.

Data and Structural Analysis: The Dilemma Behind Economic Resilience

From a structural perspective, the U.S. economy is operating at a contradictory intersection. On one hand, actual economic data shows unexpected resilience. The IMF forecasts 2026 U.S. economic growth at 2.4%, with a continuously improving labor market. In this environment, the Fed has little urgency to cut rates to “stimulate” the economy.

On the other hand, fiscal data signals “risk.” Besides high deficits, the IMF chief describes the U.S. current account deficit as “excessive,” expected to remain at 3.5% to 4% of GDP in the short term. This indicates heavy reliance on external capital inflows to balance its accounts. If global investor preferences shift, disorderly adjustments could occur. The IMF warns that rising public debt-to-GDP ratios pose increasing risks to U.S. and global economic stability.

Public Opinion and Narrative Dissection: Divergence Between Policy Vision and Reality

Currently, two core narratives exist in the market and policy circles, with the IMF report clearly favoring the latter.

The first is the “administrative optimism narrative”: represented by the White House, emphasizing the effects of tariffs and domestic tax cuts, expecting administrative measures to quickly lower borrowing costs. However, the Supreme Court’s rejection of broad emergency tariffs has legally limited this approach.

The second is the “structural realism narrative”: represented by the IMF and some mainstream macro analysts, emphasizing the risks of “fiscal dominance.” The IMF’s Western Hemisphere director explicitly recommends that the best way to address trade imbalances is through fiscal consolidation, not tariffs. This means that to lower interest rates, deficit reduction must come first, rather than relying on trade protectionism.

Reality Check of the Narrative: Who Is Driving Up Interest Rates?

A key turning point in this narrative game is that, although markets generally expect rate cuts, the main driver keeping interest rates high is actually the “growth engine” that markets anticipate—expansionary fiscal policy. The Trump administration hopes to lower rates, but its large-scale tax cuts and spending plans have increased government debt issuance and deficits, structurally pushing up term premiums and the neutral rate. Therefore, IMF’s report strips away political rhetoric and reaffirms a basic economic logic: as long as fiscal consolidation is lacking, inflation will be hard to bring down, and rate cuts will be difficult.

Industry Impact Analysis: Crypto Markets Searching for New Anchors in a “High-Pressure” Environment

For the crypto industry, this macro backdrop confirms that the long-standing “liquidity-driven bull market” is undergoing a profound shift.

First, valuation pressures on risk assets will persist. A high interest rate environment means that risk-free yields (like U.S. Treasuries) remain attractive, diverting some risk capital that might otherwise flow into crypto. Additionally, high funding costs will suppress leverage and speculative activity. Historically, when real interest rates rise, risk assets like Bitcoin tend to face valuation corrections.

Second, the market’s driving factors are shifting. With interest rates clearly high and expected to stay elevated long-term, crypto prices will rely more on fundamental innovations (such as Layer 2 adoption, RWA tokenization, etc.) rather than macro liquidity speculation. As recent market performance shows, although BTC and ETH gained 5.20% and 9.50% respectively over 24 hours, whether this rebound can continue remains subject to the harsh macro interest rate environment.

Multi-Scenario Evolution and Projections

Based on the above analysis, we can project three macro scenarios over the next 12-18 months and their potential impacts on the crypto market:

Conclusion

The IMF’s report, like tearing away the “soon-to-be rate cut” illusion, exposes the full picture of the U.S. economy’s fiscal and inflation dilemmas. For the crypto industry, which has grown accustomed to riding the liquidity wave in recent years, the longer-term environment may require cautious navigation amid structural high interest rates. Before macro conditions truly turn, maintaining healthy cash flow and focusing on endogenous growth within the ecosystem might be more certain than betting on policy shifts. As of February 25, 2026, every market fluctuation reminds us: macro narratives have changed, and the old maps no longer lead to new lands.