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IMF Cuts U.S. Growth Forecast to 2% from 2.8%

On Monday, on a CNBC‘s program, Steve Liesman talked about the International Monetary Fund (IMF) cutting the outlook on the United States economic growth. The IMF lowered its 2014 growth forecast for the United States to 2%, which is by 0.8 percentage points lower than set earlier due to the weak first half of 2014. However, it did not change its growth forecast of 3% for 2015, saying that the second half should strengthen.

International Monetary Fund

In addition, the IMF recognized raising the U.S. minimum wage, saying that it is low by historical and international standards, and an increase in minimum wage would raise income for millions of working poor.

On outlook for U.S. monetary policy, the IMF said it is particularly uncertain, whether the risk of quote significant swings in market flows and prices in the months ahead depending on the outlook for interest rates and inflation,” according to Liesman.

“The IMF said market spreads and low volatility do not reflect monetary policy uncertainty, calling for greater fed communication, including press conferences after every meeting,” Liesman added.

The U.S. economy would reach full employment by 2017. The IMF that the Fed policy rate should remain at zero for a longer than the market believes mid-2015.

Low rates raised financial stability concern for the IMF, which said in a statement that much work has been done during the past few years to reduce financial system risks, and the prolonged period of very low interest rates continues to raise financial stability concerns, particularly related to activities in the so-called shadow banks and in other nonbank intermediaries.

Further, IMF said that the latest data showed almost 50 million Americans living in poverty and the official poverty rate has been stuck above 15% despite the ongoing recovery.

Liesman added that the IMF is going to face an interesting political situation because the Republicans seem to not support raising the minimum wage and they have their problems with the IMF.

Watch the full report below:

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