The International Monetary Fund (IMF) said Thursday that it sharply cut its growth forecast for the United States to 2.5 percent due to unexpected first quarter contraction. However, the IMF said in its annual report that the economy is rebounding from the stall and likely will grow at a 3.0 percent rate in 2016. The new forecast for this year was 0.6 percentage points below the Fund's April prediction. Momentum had been sapped earlier in the year by a "series of negative shocks," the Fund said. It cited the harsh winter, the three-month West Coast ports slowdown that locked up trade, the sharp strengthening of the dollar, and the downturn in the oil industry. "These developments represent a temporary drag but not a long-lasting brake on growth," the IMF said. "A solid labor market, accommodative financial conditions, and cheaper oil should support a more dynamic path for the remainder of the year." The Fund also called on the Federal Reserve to delay a rate hike until the first half of 2016 until there are signs of a pickup in wages and inflation. "Based on the mission's macroeconomic forecast, and barring upside surprises to growth and inflation, this would put lift-off into the first half of 2016," the Fund said.
