Fed could find room to keep rates low - IMF

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The US Federal Reserve might have scope to keep interest rates at zero for longer than investors anticipated as inflation stayed muted and a 2014 slowdown prolonged the labour market recovery, the International Monetary Fund (IMF) said yesterday. The IMF cut its US growth forecast for this year to 1.7 percent from 2 percent predicted last month, citing a first-quarter contraction, after a 1.9 percent advance last year. The IMF left its forecast for next year at 3 percent, the fastest expansion since 2005. “Even with that relatively good growth outlook, we still see there’s a lot of slack in the economy,” Nigel Chalk, the deputy director of the IMF’s western hemisphere department, said. The nation’s jobless rate fell to 6.1 percent last month, down from 6.6 percent in January, even as harsh winter weather contributed to a 2.9 percent contraction in gross domestic product from January to March. Fed officials are winding down a programme of asset purchases aimed at keeping long-term rates low. – Bloomberg

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