The Federal Reserve may have scope to keep interest rates at zero for longer than investors anticipate as inflation stays muted and a 2014 slowdown prolongs the labor-market recovery, the International Monetary Fund said.
The IMF cut its U.S. growth forecast for this year to 1.7 percent from 2 percent predicted in June, citing a first-quarter contraction, after a 1.9 percent advance last year. The fund left its 2015 forecast at 3 percent, the fastest expansion since 2005. “Even with that relatively good growth outlook, we still see there’s a lot of slack in the economy,” Nigel Chalk, deputy director of the IMF’s western hemisphere department, said today on a conference call.
The nation’s jobless rate fell to 6.1 percent in June, down from 6.6 percent in January, even as harsh winter weather contributed to a 2.9 percent contraction in gross domestic product from January through March. While the job market is weaker than the unemployment rate implies, there’s “meaningful rebound” under way, the staff report said.
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