(Bloomberg) -- The International Monetary Fund urged the U.S. to act fast in implementing another round of fiscal measures to speed the recovery from the Covid-19 pandemic in the world's largest economy.
“The U.S. has fiscal space and it should be deployed quickly to hasten the recovery from the second-quarter contraction, permanently improve the social safety net, and facilitate a broader remaking of the U.S. economy,” the IMF said in a statement Friday representing preliminary staff findings from the fund's annual review of the American economy.
The IMF's statement reinforces concern that the expiration of several federal relief programs in coming weeks -- along with the resurgent coronavirus -- threaten the nascent economic rebound. With unemployment still above the highest pre-pandemic levels in more than seven decades, the economy is at risk of an extended period of weakness. The fund expects the jobless rate to average 9.7% in the fourth quarter -- nearly three times its 2019 level.
Read more: U.S. Virus Relief Set to Vanish in Series of Fiscal Cliffs
The lender said its outlook doesn't reflect additional stimulus besides what is already in place -- which allows for the possibility of a positive surprise -- though the institution acknowledged “it seems likely that another fiscal package will be legislated.”
In addition to the possible new round of fiscal aid, the IMF said the Federal Reserve has room to boost stimulus, such as by increasing asset purchases and committing to keep interest rates near zero until inflation rises above 2% for a sustained period.
The fund listed several risks to the outlook, including a resurgence in Covid-19 cases, a systemic increase in poverty, elevated debt levels and low inflation. Budget shortfalls in state and local governments, which provide funding for health care, education and unemployment insurance, could be a headwind to growth and particularly challenge low income households.
The statement also suggested bolstering America's social safety net, with policies such as increasing funding for the Supplemental Nutrition Assistance Program -- commonly known as food stamps -- and expanding Medicaid eligibility.
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