WASHINGTON (Reuters) – The International Monetary Fund raised its 2021 U.S. growth projection sharply to 7.0% on Thursday from a 4.6% forecast issued in April, due to unprecedented fiscal and monetary support.
The IMF, in its annual “Article IV” assessment of U.S. economic policies, said the revised forecast represents the fastest pace of growth in a generation for the United States. It raised its 2022 U.S. GDP growth forecast to 4.9%, up from its previous 3.5% April forecast.
The new forecasts assume that the U.S. Congress will pass the Biden administration’s infrastructure, social spending and tax plans known as the American Jobs Plan and the American Families Plan this year at a similar size and composition to their original proposals, the IMF said.
“Indicators suggest significant labor market slack remains which should serve as a safety valve to dampen underlying wage and price pressures,” the IMF said in its review statement.
The Fund added that it expects U.S. inflation expectations to remain well-anchored, but these “will be obscured in the coming months by significant, transitory movements in relative prices,” which could cause personal consumption expenditure inflation to temporarily peak at close to 4% later this year.
(Reporting by David Lawder; editing by Jonathan Oatis)
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