The International Monetary Fund (IMF), which, in the past year alone, has provided financial assistance to the economies of Pakistan and Iceland in, publically raised its outlook for the United States. It also called for steps that would refocus concerns about inflation and increasing public debt.
The IMF forecasts the U.S., world’s largest economy, will contract 2.5% during 2009 before expanding 0.75% in 2010. This news came in a recent announcement that was part of the IMF’s annual analysis of the United States. Back in April, the IMF released its World Economic Outlook report. In it, the U.S. was forecast to contract 2.8% this year before stopping in 2010.
The IMF, a Washington-based lender, stated that economic recovery would be a “gradual” process with some inherent risks involved. It would be up to the Federal Reserve to provide some further credit assistance should market conditions worsen. Additional fiscal stimulus might be considered as well if the economy doesn’t rebound as expected.
The IMF staff review also stated, “The combination of financial strains and ongoing adjustments in the housing and labor markets is expected to restrain growth for some time, with a solid recovery projected to emerge only in mid-2010.”
The economic stimulus package brokered by the Federal Reserve, the Obama administration, and Congress was lauded with praise in the report for its excellent focus. Yet, the report warns that the extraordinary measures required to stabilize the economy and financial markets must be followed up by a strategy to regulate them quickly before inflation rates rise.
The IMF projects that the stimulus package will increase GDP growth by 1% this year and 0.25% in 2010.
There are estimates that the federal deficits will average 9% of GDP from 2009 through 2011, and public debt will almost double to 75% of GDP.
Tags: news, public debt, Treasury bond rates, outlook report, staff, federal reserve, personal debt, ObamaAccording to the report, this increased debt “may put significant pressure on Treasury bond rates.”
It also described the U.S. dollar as “modestly above” the medium-term fundamental level.
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