Money Monitor

Things to monitor this summer.

There's always a but.

   Watch for another standoff between Congressional conservatives and the Administration over the federal budget and the debt ceiling.
   Don't expect the Fed to raise interest rates for another year.

   The government's fiscal year begins October 1, and the federal budget needs to be approved by Congress before that, or the nation faces the risk of another government shutdown as conservatives refuse to raise the debt ceiling in an attempt to force radical changes in federal spending.
   Economic recovery may be under way, despite a stumble in the first three months of the year, but "there are vulnerabilities that cannot be ignored," according to an analysis by the International Monetary Fund. And the biggest danger to future economic strength is in the financial sector, the IMF report said.
   "Barring any negative shocks," the IMF added, "the U.S. economy should be able to bounce back to 3 percent by 2016." However, the housing recovery is "not yet on a solid footing," the IMF said, and weaker growth in the rest of the world could suppress U.S. exports, and drag down growth.
   In addition, the inability of Congress and the Executive Branch to pass a budget will create uncertainty and damage the economy. Already, congressional failure to approve a budget and raise the debt ceiling shut down the government for 16 days in 2013, and political gamesmanship this year could close the doors again after October 1, even as campaigning for the Oval Office job goes into high gear. And we still have a year to wait before candidates are even nominated, another few months until Election Day in November of next year, and still more time until the next President takes office on January 20, 2017.
   Meanwhile, the economic ship is gaining speed, but could be torpedoed by easily avoidable risks, such as the failure to approve spending and regulatory measures to slow down irresponsible behavior in the financial sector, such as banking and insurance companies.
   In any case, assuming all goes well, the IMF forecast a growth rate of 2.5 percent this year and 3 percent next year. But unless "structural weaknesses" in the economy are dealt with, the growth rate could fade to 2 percent.
   In dealing with all this, the Federal Reserve Board, which has held interest rates near zero while it waits for the economy to gain health, will likely wait until next summer before it acts.