Citing a larger than expected contraction during the year’s first quarter, the International Monetary Fund has cut its original forecast for the economic growth of the United States to 1.7%.
Earlier in June, the international organization claimed that overall growth for the world’s largest economy this year will end up at 2% after it surges between 3% and 3.5% in the second half of the year. The IMF said, however, that, “The drag on growth from the first quarter contraction will not be offset,” referring to the economy’s 2.9% decline, the worst in five years, that was due to slower restocking by businesses and a weakness in the housing market.
The IMF added that its lower expectations will contribute to a slack in the US labor market which will only achieve full employment sometime in 2018. This would allow the Federal Reserve to maintain its current interest rates near zero beyond current increase forecasts of mid 2015 if inflation and financial markets are stabilized. At that point, the central bank could choose to enact gradual hikes by doing so every other policy meeting. Concerns over disappointing growth in the future motivated the IMF’s preference for the gradual rate rise since political tensions continue to escalate around the world and emerging markets are slowing down.
The IMF recommended that the US attempt to lure in more Americans into its workforce by providing assistance for childcare, investing more into job training and infrastructure, and enacting reforms in taxation and immigration. It predicted as well the need to increase government spending to support the country’s continued recovery.
The material has been provided by InstaForex Company – www.instaforex.com
IMF US growth forecast revised to 1.7%
Citing a larger than expected contraction during the year’s first quarter, the International Monetary Fund has cut its original forecast for the economic growth of the United States to 1.7%.
Earlier in June, the international organization claimed that overall growth for the world’s largest economy this year will end up at 2% after it surges between 3% and 3.5% in the second half of the year. The IMF said, however, that, “The drag on growth from the first quarter contraction will not be offset,” referring to the economy’s 2.9% decline, the worst in five years, that was due to slower restocking by businesses and a weakness in the housing market.
The IMF added that its lower expectations will contribute to a slack in the US labor market which will only achieve full employment sometime in 2018. This would allow the Federal Reserve to maintain its current interest rates near zero beyond current increase forecasts of mid 2015 if inflation and financial markets are stabilized. At that point, the central bank could choose to enact gradual hikes by doing so every other policy meeting. Concerns over disappointing growth in the future motivated the IMF’s preference for the gradual rate rise since political tensions continue to escalate around the world and emerging markets are slowing down.
The IMF recommended that the US attempt to lure in more Americans into its workforce by providing assistance for childcare, investing more into job training and infrastructure, and enacting reforms in taxation and immigration. It predicted as well the need to increase government spending to support the country’s continued recovery.
The material has been provided by InstaForex Company – www.instaforex.com
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