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IMF says US slowdown is likely temporary

IMF says US slowdown is likely temporary
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John Lipsky, the acting head of the International Monetary Fund says the US economy doesn’t need extra stimulus as a slowdown in global growth is likely to be temporary, caused by a spike in energy prices.

John Lipsky believes the US central bank, the Federal Reserve, can ease off on quantitative easing – that is printing more money – as the world’s largest economy is likely to pick up due to growth in exports and disposable incomes.

In an interview with Reuters, Lipsky was asked if the Fed needed to embark on additional quantitative easing and replied: “Our expectation is current US monetary policy is consistent with a return to moderate growth.”

Lipsky added that there is a risk of high unemployment as economic recovery will be slow, and it is appropriate for advanced economies to maintain accommodative monetary policies.

He would not be drawn into discussing any details of a proposed second euro zone bailout for debt-laden Greece.

Almost all advanced economies also face the challenge of improving their public finances to reduce debt burdens, Lipsky said.

Emerging market economies also need tighter fiscal and monetary policy to cope with inflationary pressure, he said.

Greece has gone through very strenuous efforts to cut spending and privatise assets to reduce its debt burden, Lipsky said.

Current plans to support Greece do not involve restructuring the country’s debts, Lipsky said.

He was more cautious in his comments on the IMF’s involvement in what euro zone sources say is a new 80-100 billion euro bailout package now taking shape. It would effectively replace a 110 billion euro deal agreed only a year ago.