The International Monetary Fund on Tuesday downgraded its forecast for economic growth in the U.S. and the rest of the world this year, citing rising inflation, the failure of President Biden’s Build Back Better spending bill, higher energy prices and the spread of COVID-19’s omicron variant.
The IMF slashed the growth forecast for the U.S. to 4.4% in 2022, down from the 5.9% projected last year. In October, the world lending agency had forecast growth of 4.9% in the U.S.
China’s growth is forecast to slow to 4.8% this year, down from a projection of 8.1% last year.
“Rising energy prices and supply disruptions have resulted in higher and more broad-based inflation than anticipated, notably in the United States and many emerging market and developing economies,” the IMF said in its report. “The ongoing retrenchment of China’s real estate sector and slower-than-expected recovery of private consumption also have limited growth prospects.”
The IMF also said broadening price and wage pressures in the U.S. have prompted the Federal Reserve “to accelerate its taper of asset purchases and signaled that it will raise rates further in 2022 than previously expected.”
The Fed opened a two-day policy meeting on Tuesday that could result in an announcement to raise the benchmark interest rate. Central bank officials have forecast at least three rate hikes this year as they try to curb inflation, which hit a 40-year high of 7% in December.
Stocks fell again in early trading on Tuesday, partly on concerns about the expected Fed action. The S&P 500 was off more than 1.5% by mid-morning.
• This article is based in part on wire service reports.
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