The IMF Lowers its Economic Forecast for the US

This morning, the US Dollar extended its decline from Thursday’s battering thanks to the International Monetary Fund (IMF) reducing its economic growth outlook for the United States’ economy. They did this, mainly, because of policy uncertainty. The IMF cut its 2017 gross domestic product (GDP) forecast to 2.1 percent from the 2.3 percent outlook in April. They also slashed the 2018 outlook to 2.1 percent from the previous 2.5 percent print in the time frame from above.

US President Donald Trump’s plans to cut taxes and boost infrastructure spending have been a main focus for his administration. Their execution highly anticipated by many. However, the IMF reduced its expectations that such economic and business friendly programs will be passed. These plans include regulations rollback, tax reform and a large infrastructure spending program. Many are now viewing that Trump will have a tough time clear legislative hurdles for any to be signed into law. This poses a concern for markets. Lately the financial markets are moving to price in such failures to his policy agenda.

IMF Signals Concerns with the US Economic Growth

The International Monetary Fund also stated that it feels the gradual rate hike path, to monetary policy normalization, that the Federal Reserve has sustained is still appropriate. The fund says that US job growth has been consistently solid over the last several months to year. They went on to call for the Fed to accept a small, albeit temporary inflation overshoot. They also called on the US Federal Reserve to continue to inform the public of a well laid out plan to reduce their hugely bloated balance sheet.