|The US economy is projected to continue to grow steadily in 2015 and 2016. Solid increases in private employment will continue to push down the unemployment rate, though pockets of labour market slack will remain for a while. Monetary conditions and export markets should support some acceleration in demand, as the drag from tight fiscal policy dissipates and as improvements in household net worth provide a growing impetus to private spending.
Monetary policy remains highly supportive, but as labour market slack diminishes this accommodation will need to be carefully withdrawn to keep inflationary pressures in check. The Federal Reserve’s large-scale asset-purchase programme ended in October. Policy rates are then expected to begin to rise in mid-2015. The federal budget deficit has narrowed substantially, reflecting cyclical improvements, consolidation measures and other influences, and some further narrowing is projected in 2015 and 2016. Fiscal policy should focus on addressing longer-term pressures associated with healthcare spending and old age pensions. The authorities should also facilitate infrastructure spending, such as by securing sustainable funding.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.