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Essentials of Monetary Policy

The U.S. Budget Situation Much Worse despite Economic Growth

April 25, 2018
François Dupuis, Vice-President and Chief Economist • Francis Généreux, Senior Economist

After improving for a few years early in the decade, the imbalance in the U.S. federal government’s finances has started to worsen again. The deficit reached US$665B at the end of fiscal 2017, and the situation should keep eroding in the coming years, according to the Congressional Budget Office’s (CBO) latest projections. At this point in the economic cycle, growth should put a balanced budget within reach, but Washington’s latest decisions will instead make deficits and the debt balloon in the coming years. The situation could put some upside pressure on interest rates, as well as become a problematic issue if the economy suffers another setback.