IMF Says U.S. Faces `Sharp Downturn’ as Market Crisis Worsens

October 4, 2008 by · Leave a Comment
Filed under: Economic News 

Personally I think some of the commentary on our current economic crisis has not had what I would call “baseless optimism”. They have been warning people on our current situation and I believe I have not read any statements that have called for a premature end to our crisis but a more gradual modification of their outlook that looks to be more realistic compared to what is actually happening in the market. Today it was surprising that the bailout bill finally found the votes it needed to pass and the Dow Jones shed 157 points of its average. What was most frustrating was seeing our politicians keep saying the market was sending a message, what message is it sending now?

News Piece:

The U.S. may fall into a recession as the financial rout deepens, the International Monetary Fund said in its most pessimistic outlook for the world’s largest economy since the credit crisis began last year.

“The financial turmoil that began in the summer of 2007 has mutated into a full-blown crisis,” the fund said in a section of its semiannual World Economic Outlook released in Washington today. There is “a substantial likelihood of a sharp downturn in the United States,” the fund said.

By contrast, the IMF in July projected the U.S. would “contract moderately” in the second half of 2008 before recovering in 2009. Officials also said in a July update of economic forecasts that the global growth outlook was more “balanced.”

“Strong actions by policy makers to deal with the stress and support the restoration of financial system capital seem particularly important,” the lender said today. Next week, the IMF will release updated projections for gross domestic product for the U.S. and other economies.

The warning came as the U.S. Congress worked to pass a $700 billion bank rescue package to reassure financial markets. The Senate passed the legislation late yesterday, and the House of Representatives may vote tomorrow after rejecting a different version three days ago.

Euro Area

The 15 countries that use the euro may be able the weather financial shocks and slowing growth, the IMF said. “In the euro zone, by contrast, the relatively strong position of households offers some protection against a sharp downturn,” the report stated.

IMF Managing Director Dominique Strauss-Kahn said as recently as Sept. 17 that “we may be seeing the end of the financial-sector crisis.”

Click Here to Continue Reading

Speak Your Mind

Tell us what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!