Friday, July 9, 2010

IMF Warns of Contagion Threat to US

In its new report, the IMF warned that, along with risks of renewed weakness in the US housing market, international events of recent months had introduced risks to the recovery. “Sovereign strains in Europe have become an increasing concern, potentially impacting the United States through financial markets and, in a tail risk scenario, trade links,” the fund said, according to FT. “Tail risk” usually refers to an extreme scenario that may be more probable than standard assessments predict.

The fund also said that, since it was less optimistic than the US administration about the capacity of the US economy, fiscal policy should be tightened more than the White House was currently planning.

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