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2nd LD Writethru: IMF cuts U.S. 2015 growth forecast down to 2.5 percent

Xinhua, June 4, 2015 Adjust font size:

The International Monetary Fund (IMF) on Thursday cut U.S. economic growth forecast for 2015 down to 2.5 percent from its April's prediction of 3.1 percent.

IMF chief Lagarde said Thursday that the revised down forecast was largely due to the soft performance in the first quarter.

The U.S. economy shrank at an annual rate of 0.7 percent in the first quarter, marking the third quarterly contraction after the financial crisis ended in mid-2009. The contraction was in part due to harsh winter weather, labor disputes in Western port, slowdown in investment in energy industry, and effects of strong U.S. dollar.

After concluding the 2015 Article IV Consultation with the U.S. Thursday, the IMF said in a statement that these developments represent a temporary drag but not a long-lasting brake on growth.

The IMF suggested the U.S. Federal Reserve should delay its first interest rate hike into the first half of 2016 in order to see greater signs of inflation growth.

Fed chair Yellen said in late May that the central bank was preparing for the first rate hike later this year. Market investors widely see September or even later as the most likely time for a Fed rate increase. The central bank has kept the rate near zero from December 2008.

According to Lagarde, the inflation rate in U.S. now doesn' t warrant a rate hike without risks in the next few months. Based on the judgment, the IMF believed the economy will be better off with a rate hike in early 2016.

The price index for the personal consumption expenditure (PCE), a gauge for the inflation level preferred by the Fed, increased 0.1 percent year on year, and the PCE price index, excluding volatile food and energy, increased 1.2 percent in the 12 months through April. Endi