According to the International Monetary Fund (IMF), the growth in the United States is likely to continue through 2014 in the wake of a bi-partisan budget deal out of Congress and recent positive economic data. Revisions in the third quarter gross domestic product (GDP) showed an increase to 4.1 percent versus the original estimate of 3.6 percent.
Christine Lagarde, the IMF Managing Director, raised her outlook as worries ease about when the Federal Reserve would begin to taper the $85 billion in monthly assets purchases intended on stimulating the economy five years after the financial crisis. Although a taper is beneficial in the long-run, the Fed’s balance sheet struck the $4 trillion mark last week.
Lagarde said in an interview that the IMF will be revising the growth out look for the US but did not specify the changes. Previously, the IMF forecast of growth expansion to be 2.6 percent in 2014, compared with the 1.6 percent in 2013. She urged the US Congress to not caterwaul over raising the debt limit as borrowing authority end in February.
However, Lagarde praised the Fed’s communication and plan to begin the taper. I think the market participants beg to differ as it the forward guidance and language out of the Fed was quite confusing at times.
Hopefully 2014 can bring on a new year of economic prosperity in the United States, but there is much to work on. The Fed has carried the economy, so far. Now it is time for the fiscal policy to encourage further growth and success.