The International Monetary Fund is raising its outlook for the U.S. economy, as a budget deal in Washington and the Federal Reserve's plan to taper its bond buying ease doubts about the future, IMF managing director Christine Lagarde said.
"We see a lot more certainty for 2014," she said in an interview yesterday on NBC's "Meet the Press."
With the unemployment rate falling, the Fed's action last week and the government budget agreement, "all of that gives us a much stronger outlook for 2014, which brings us to raising our forecast," she said.
Lagarde's optimism follows a report that showed the labor market is improving while investors pushed stocks to record highs. In October, the IMF said the U.S. economy would expand 2.6 percent next year, compared with 1.6 percent in 2013.
While she didn't specify any new figures in the interview, the Washington-based fund typically issues revised forecasts in January.
The jobless rate, at 7 percent in November after a 7.3 percent rate the month before, will keep falling as confidence increases that the economy is on a sustainable growth path, Lagarde said.
She urged Congress to be "responsible" and "not threaten the recovery with yet another debate about whether or not the U.S." will honor its obligations or default on debt as the Treasury Department nears the limits of its borrowing authority in February.
The Standard & Poor's 500 has rallied about 27 percent this year to a record and is on course for its best performance since 1997.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, has advanced 3.5 percent this year.
Commerce Department figures released Friday showed the world's largest economy grew in the third quarter at the fastest rate in almost two years.
Gross domestic product climbed at a 4.1 percent annualized rate, up from a previous estimate of 3.6 percent, the report showed.
The Fed said last week it plans to trim its monthly bond purchases to $75 billion from $85 billion starting in January, taking the first step toward unwinding the unprecedented stimulus put in place by outgoing chairman Ben Bernanke.
Lagarde praised the Fed's "very well-communicated" plan.
"What has been announced in terms of tapering is an indication that the central bank in the U.S. has more trust, more confidence in the real economy picking up now," she said.
The IMF chief also indicated support for the bipartisan budget, passed last week, that eases $63 billion in automatic spending.
"Making sure that there is growth, that there is adequate redistribution through various systems, is important," Lagarde said when asked about the minimum wage and income inequality. "There is a clear indication that rising inequality leads to less sustainable growth."