US budget deficit shrinks to $1.3tr

| October 17, 2010

According to Government figures, the US budget deficit fell to $1.294 trillion (A?813 billion) in the 12 months to the end of September.

The deficit equates to 8.9% of GDP, down from 10% of GDP in 2009, but still represents the highest since the end of the Second World War.

The target for President Barack Obama’s administration is to shave the deficit to 4.3% of GDP by 2013.

Treasury Secretary Timothy Geithner cautioned: “We still have a long way to go to repair the damage to the economy and address the long-term deficits caused by the crisis.”

The US emerged from recession in the third quarter of 2009 but the recovery has been slow, due to high unemployment and low inflation.

There is speculation that US central bank, the Federal Reserve, will take measures to stimulate the economy by way of buying up US Government bonds in order to lower borrowing costs.

The next meeting of the Federal Open Market Committee, which sets interest rates and the level of quantitative easing, will take place on 2-3 November, when the Fed is expected to give details of its fresh injection of capital.

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