U.S. economic growth may quicken to 3 percent or more early next year from the current pace of 2 percent to 2.5 percent as the effects of federal spending cuts subside, Treasury Secretary Jacob J. Lew said.
“There is no reason, looking at the beginning of next year, not to see an economy that’s growing at a 3-plus percent rate,” Lew said in response to questions after a speech to the City Club of Cleveland today. “We go into next year in a stronger position.”
Lew based his projection on a resolution of across-the-board government spending cuts known as sequestration, which he said is holding back growth in the first half of this year. Another restraint on the U.S. expansion has been stagnant growth in Europe, the biggest market for U.S. exports, Lew said.
Lew, who is traveling to the U.K. later this week for talks with Group of Seven finance ministers, also said European policy makers have responded to calls for a stronger emphasis on growth over fiscal austerity.
“They’ve given more time to countries like Portugal and Ireland and France to meet fiscal targets. That’s going to have some effect,” and “the European Central Bank has loosened up on its lending rates,” he said. “We can participate, as I will this weekend, in meetings with my counterparts and make the case. We have had some success, I think, in urging them in the right direction.”