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IMF cuts US 2014 growth forecast to 1.7%

Thursday, July 24, 2014

The International Monetary Fund yestersday said it expects the US economy to grow 1.7 per cent in 2014, even more slowly than it predicted a month ago, as weakness in the first quarter offsets an expected pick-up in the second half of the year. The IMF, which in June forecast two per cent growth for the world’s largest economy this year, said US activity should accelerate to a pace of three per cent to 3.5 per cent in the rest of 2014, and grow by three per cent next year and in 2016.


US GDP contracted at a 2.9 per cent annual pace in the first three months of the year, dragged down by a weak housing market, a slower pace of restocking by businesses and lower exports. It was the sharpest decline in five years. Lower growth expectations should contribute to continued slack in the labor market for the next three to four years, with the United States remaining below full employment until 2018, the IMF said.



It added that the US Federal Reserve could keep its benchmark interest rates at zero beyond the middle of 2015, the date implied by policymaker forecasts, as long as inflation and financial stability concerns remain subdued. The IMF said it believed the US central bank could then raise rates at every other policy meeting, in what would be a more gradual approach than median Fed forecasts currently suggest.