IMF Downgrades Outlook for U.S. Growth in 2016 to 2.2%

By: Daniel Steingold | June 22, 2016

On Wednesday, the International Monetary Fund (IMF) revised its outlook for U.S. economic growth in 2016 downward.

Citing a weak energy sector, a strong dollar, and events happening overseas, the IMF particularly cautioned that the looming possible Brexit could significantly impact the American economy.

The IMF had previously estimated in April that the American economy would grow by 2.4 percent; the revised estimate predicts a 2.2 percent growth rate for the year. The IMF’s projected 2.5 percent growth rate for 2017 was left unchanged.

The new growth rate projection has prompted the IMF to recommend that the Federal Reserve does not hastily increase interest rates. It has also prompted the IMF to warn Americans that the future growth outlook for their country may not be promising.

The IMF recommended that the U.S. be vigilant in promoting wage and price inflation, which is particularly important because much of the world is currently struggling with the latter.

According to the IMF, the U.S. dollar is valued at a rate 10-to-20 percent higher than it should be, and if England exits the European Union later this week, a further overvaluing could occur.

It is believed that the U.S.’ recent decline in labor force participation and physical output, along with increasingly larger gaps in income and high levels of poverty could be large impediments to growth.

In its recommendation, the IMF urged the U.S. to find ways to cut its debt, while overhauling its tax code.

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