The International Monetary Fund predicts the US economy would expand at a faster pace next year, given positive economic data and some signs of compromise in Congress, the head of the Washington-based lender said.
IMF Managing Director Christine Lagarde also praised the US Federal Reserve’s communication of its decision last month to start scaling back its massive monetary stimulus.
“Growth is picking up,” Lagarde said on NBC’s “Meet the Press.” “And unemployment is going down. So all of that gives us a much stronger outlook for 2014, which brings us to raising our forecast.”
The IMF forecast in October that the US economy would expand 2.6 percent in 2014 after growing 1.6 percent this year. At the time, Lagarde warned that Congressional failure to raise the US debt ceiling could damage not only the United States, but the rest of the global economy.
A US Congress, deeply divided along party lines, did manage to pass a limited, two-year budget deal last month to trim some planned spending cuts and reduce the risk of a government shutdown.
Yet the legislation does nothing to avoid a possible US debt default that could occur if Congress does not raise a cap on US borrowing.
President Barack Obama’s administration has warned that the government could run out of borrowing authority needed to pay its bills as soon as February if lawmakers do not swiftly raise the debt ceiling.
“The budget deal that was cut at year-end is a very good sign of … responsibility, accountability and realism,” Lagarde said.
“I certainly hope that in February, Congress will be equally responsible and will not threaten the recovery with yet another debate about whether or not the US honour or default.”