IMF lowers U.S. economic outlook

The International Monetary Fund is lowering its expectations for the U.S. economy, as a strong dollar and a pending interest rate hike put some pressure on growth.

In its latest economic outlook released Tuesday, the IMF predicted the U.S. economy would grow 3.1 percent in 2015 and 2016, shaving half a percentage point off 2015 expectations from January and 0.2 percent from its 2016 projection.

{mosads}However, even with lowered expectations, the U.S. is still expecting to vastly outperform all other advanced economies, as the IMF predicts major European nations, Canada and Japan are likely to see growth ranging from half a percent to 2.8 percent in the next two years.

While expecting slightly slower growth from the U.S. in the coming years, the IMF’s global outlook is largely unchanged, as the body still predicts relatively strong growth of 3.5 and 3.8 percent in 2015 and 2016, respectively. The IMF said it expects the advanced economies in the U.S. and Europe to drive the rebound thanks to lower oil prices.

In the U.S., the IMF said the lower projection was due to the strengthening of the dollar against other foreign currencies, which weighs on U.S. exporters, as well as the eventual tightening of monetary policy from the Federal Reserve. But at the same time, the IMF said Americans should be able to weather those drags, thanks to lower oil prices and more moderate fiscal policy from Washington.

After years of heated debate about tax and spending policy from federal policymakers, the two parties have largely avoided similar brinkmanship of late, with little expectation for major new fights in the immediate future.

Meanwhile, the Fed is preparing to raise interest rates, potentially as soon as this summer but likely sometime in the fall. The interest rate increase will be the first from the Fed since the financial crisis.