OECD Economic Outlook, Volume 2005 Issue 2
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United States
As the last signs of slack in the economy disappear, the large monetary stimulus delivered in recent years is no longer desirable and is being removed. Short-term interest rates are approaching a neutral position and will need to turn restrictive should increases in energy prices start being built into underlying inflation. The federal government’s financial position has improved, thanks to an unexpected increase in revenues. But much of this windfall is being spent on large hurricane and military-related expenditures. This highlights the importance of fiscal discipline in the face of longer-term spending pressures and the risks posed by the large external deficit.
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