The U.S. recovery remains tepid and subject to elevated downside risks, in light of financial strains in the euro area and uncertainty over domestic fiscal plans. Against this background, policies need to decisively tackle medium-term challenges while using the available room to support the recovery. Specifically, it is critical to ensure a pace of fiscal adjustment in the short run that is supportive of the recovery, removing the threat of a very large fiscal adjustment in 2013, and to adopt a credible medium-term plan restoring fiscal sustainability.
Monetary policy conditions appropriately remain very accommodative, with some room for further easing should the outlook deteriorate. Aggressive implementation of the measures proposed by the Administration to speed up the housing recovery could yield sizable benefits to the broader economy. Good progress has been made in reforming the U.S. financial system, but vulnerabilities remain and appropriate resources should be devoted to complete and implement the new regulatory framework and monitor systemic risk.
Monetary policy conditions appropriately remain very accommodative, with some room for further easing should the outlook deteriorate. Aggressive implementation of the measures proposed by the Administration to speed up the housing recovery could yield sizable benefits to the broader economy. Good progress has been made in reforming the U.S. financial system, but vulnerabilities remain and appropriate resources should be devoted to complete and implement the new regulatory framework and monitor systemic risk.
