IMF Downgrades US
Economic Forecast, Urges ‘Credible Fiscal Policy’
September 21, 2011
International Monetary Fund says the U.S. economy is struggling to
overcome “sluggish” growth due to an unresolved government debt crisis
and weaknesses in the housing market and household finances.
In a report released Tuesday, the IMF downgraded its forecast for U.S.
economic growth this year to 1.5 percent, one percentage point lower
than its previous projection. It says the “first priority” of the U.S.
government should be to commit to a “credible fiscal policy” that puts
the country's massive public debt on a “sustainable track.”
The report urges the White House and Congress to agree on a “medium-term
debt reduction plan” to avoid a sudden collapse of market confidence
that could disrupt global economic stability. It also calls for
“temporary” government stimulus measures and an “accommodative” monetary
policy to encourage private economic activity.
In another report highlighting weakness in the housing market, the U.S.
Commerce Department said Tuesday construction of new homes fell more
than expected in August. It says U.S. housing starts declined 5 percent
from July, to a seasonally-adjusted annual rate of 571,000 homes.
The IMF also predicted U.S. unemployment will remain above 9 percent
next year. The jobless rate was 9.1 percent in August. Persistently high
unemployment has dampened consumer spending, the biggest part of the
expect the U.S. Federal Reserve to announce new measures to try to boost
the U.S. economy on Wednesday, at the end of a two-day policy meeting.
The central bank opened the meeting Tuesday.
Analysts say the Fed is likely to announce a move to buy long-term U.S.
government bonds as a way of pushing down long-term interest rates and
encouraging businesses to invest. The U.S. central bank has kept
short-term interest rates near zero since 2008.
The analysts do not expect the Fed to repeat its recent purchase of $600
billion in U.S. Treasuries, a “quantitative easing” operation that
expired in June. The operation fell short of the Fed's goal of
generating self-sustaining economic growth and critics said it risked