Forex News – U.S. slowdown likely temporary says IMF’s Lipsky

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IMF acting chief John Lipsky said in an interview with Reuters on Wednesday that he believes the U.S. growth slump is likely temporary as well as the overall slowdown in other major developed economies of the world. Lipsky said that the main factor affecting the recovery was the elevated energy prices, namely crude oil, which was caused by political unrest in the Middle East, and he believes this is temporary since commodities prices will soon steady and have already fallen.

The acting managing director of the International Monetary Fund told Reuters that the U.S. Federal Reserve does not need to consider additional monetary policy stimulus as the world’s largest economy is likely to pick up in coming quarters due to growth in exports and disposable incomes.

“ 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”, Lipsky said.

“Our expectation is current U.S. monetary policy is consistent with a return to moderate growth,” he said, when asked if the Fed needed to embark on additional quantitative easing.

In his speech in Atlanta on Tuesday, U.S. Federal Reserve Chairman Ben Bernanke acknowledged the U.S. economy had slowed but did not mention or give any signal on providing additional stimulus. This raises concerns since a prolonged lull in the economy could put the Fed in a bind as it has exhausted many of its policy options.

“Though the Fed Chairman said economic growth is likely to pick up in the second half of the year, his overall dour comments virtually guarantee that U.S. interest rates will remain near record lows through the foreseeable future,” said David Rodriguez, a strategist at DailyFX.