IMF cuts US growth and urges minimum wage hike

Business News of Tuesday, 17 June 2014

Source: Graphic Online

The International Monetary Fund (IMF) has slashed its US growth forecast and urged policy makers to keep interest rates low and raise minimum wage to strengthen its recovery.

The crisis lender said it expected two per cent growth this year, down from its April forecast of 2.8 per cent, after a “harsh winter” led to a weak first quarter.

However, it expects three per cent growth in 2015.It also said the US should increase its minimum wage to help address its 15 per cent poverty rate. “Given its current low level (compared both to US history and international standards), the minimum wage should be increased,” the IMF said in its annual assessment of the US economy.

It said a hike in the minimum wage would raise incomes for “millions of working poor” and help to create “a meaningful increase” in after-tax earnings for the nation’s poorest households.

READ ALSO:   ‘No wholesale dismissal of pupil teachers’

The IMF said it only expected the economy to reach full employment by the end of 2017, with “muted” inflation pressures. It said this meant interest rates could stay low for longer than the mid-2015 date, when a rise is expected by markets.

“Labor markets are weaker than is implied by the headline unemployment number,” the IMF said, saying long-term unemployment remained high and wages were stagnant.

“With better growth prospects, the US should see steady progress in job creation. However, headline unemployment is expected to decline only slowly,” it added.