IMF cuts US growth forecast

The International Monetary Fund (IMF) has slashed its US growth forecast, called upon policy makers to keep interest rates low and raise the minimum wage to strengthen its recovery.

The crisis lender said it expects 2% growth this year, down from its April forecast of 2.8%, after a 'harsh winter' led to a weak first quarter. However it expects 3% growth in 2015.

It also said the US should increase its minimum wage to help address its 15% poverty rate.

"Given its present low level (compared to US history and international standards), the minimum wage should be increased," the IMF report on the annual assessment of the US economy said.

It said a hike in the minimum wage would raise incomes for "millions of working poor" and help to create "a meaningful increase" in after-tax earnings for the nation's poorest households. The report said it only expected the economy to reach full employment by the end of 2017, with 'muted' inflation pressures.

It said this meant interest rates could stay low for longer than the mid-2015 date, when a rise is expected by markets.

"Labour markets are weaker than is implied by the headline unemployment number," the report said, saying long-term unemployment remained high and wages were stagnant.

"With better growth prospects, the US should see steady progress in job creation. However, headline unemployment is expected to decline only slowly," it said.