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IMF: Less grow, but no recession for US economy

The International Monetary Fund expects the US economy to grow at a pace “below potential” this year, but not to slide into a recession.

“We still see a period of below-potential growth as the most likely scenario for the US, given the economy’s good starting position,” Masood Ahmed, director of the International Monetary Fund’s external relations department, told a press briefing Thursday. High profits, strong corporate and household balance sheets, and solid macroeconomic policies ensured that the economy was in a good position when the sub-prime mortgage crisis struck at the end of last summer, he said. “There are risks on the downside,” he said, “but the most likely scenario remains for the US economy a period of below-potential growth.” To take into account recent developments in financial markets and in policies, the IMF will release its updated projections for US and global economic growth for 2008 next week, instead of Friday as scheduled previously, Ahmed added. Ahmed described the US Federal Reserve’s move Tuesday to cut a key interest rate by 0.75 of a percentage point to 3.5% as “appropriate” and “helpful.” “We’ve also noted that the financial markets’ prices are consistent with expectations of significant future rate declines, and we are confident that the Federal Reserve will respond to new developments and new fundamental and financial developments as needed,” he added. When asked about the economic stimulus package that the Bush administration is calling for, Ahmed said that “targeted and timely” measures would be helpful. “In these circumstances, targeted and timely fiscal measures could provide near-term support for demand,” he said. (