IMF downgrades US economic growth

| June 29, 2011 | 0 Comments
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The International Monetary Fund (IMF) has today downgraded its forecast for the US economy expecting growth of 2.5% this year and 2.7% next year.

The forecast for next year is below the Federal Reserve’s prediction of 3.3%.

The Washington-based Fund was providing its annual review of the world’s largest economy and is warning the US to come to an agreement to lift the Government’s borrowing limit.

The warning comes as the Obama administration and Congress are in tense negotiations over making budget cuts before approval is given to raise the limit.

Last month, the US Treasury reached its $14.3 trillion limit and needs to raise the ceiling by 2 August or the country will default on its debt.

If a deal is not reached, it could result in a downgrade to the country’s AAA debt rating, the IMF said.

According to John Lipsky of the IMF, a default “would have very serious and far-reaching consequences.”

“It would rattle markets and send interest rates soaring, making mortgages and other consumer loans more expensive,” Lipsky added.

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