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IMF cuts US forecast, issues warning

Published on Jun 17, 2014 6:39 AM
IMF Managing Director Christine Lagarde speaks at the International Monetary Fund's headquarters on June 16, 2014 in Washington, DC. -- PHOTO: AFP

WASHINGTON (AFP) - The International Monetary Fund on Monday slashed its forecast for the United States and urged policymakers to keep interest rates low and raise the minimum wage to strengthen growth in the world’s largest economy.

The global crisis lender said in its annual report card on the US economy that the country will likely grow only 2.0 per cent this year, compared with the previous 2.8 per cent estimate, blaming mainly the unexpected contraction in the first quarter.

It said growth is likely to rebound to 3.0 per cent next year, but to ensure that, the government should take measures like increasing the minimum wage and embarking on a strong infrastructure-building programme.

Moreover, the US Federal Reserve should not expect the economy to get back to full employment before the end of 2017, and that it could afford to hold its key interest rate at the zero level past the middle of next year, when the Fed has signalled it expects to raise the rate.

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