Tuesday, January 25, 2011

IMF Warns US

The International Monetary Fund (IMF) has issued its clearest warning to date that the latest US fiscal stimulus is ill-judged, unlikely to do much for growth and raises the risk of a bond crisis over the medium term.

The IMF said the US economy was enjoying a short-term spike as a result of quantitative easing by the US Federal Reserve and the fiscal package agreed by Congress and the White House late last year, but expressed reservations about the side-effects of these policies.

"Although some targeted measures in the US are justifiable at this juncture given the still weak labour and housing markets, the recently implemented stimulus is expected to deliver only a relatively small growth dividend [given its size] at a considerable fiscal cost," the IMF said in its update to the World Economic Outlook.

The IMF said the deficit would remain stuck at 10.75pc of GDP in 2011, with public debt exceeding 110pc of GDP in 2016.

"The absence of a credible, medium-term fiscal strategy would eventually drive up US interest rates, which could prove disruptive for global financial markets and for the world economy," it said. The report called for an assault on America's entitlements behemoth, and caps on discretionary spending.
Read the rest here.

1 comment:

gdelassu said...

Well, the IMF clearly has a fantastic track record for offering wise advice...