The International Monetary Fund (IMF) has claimed the large federal budget cuts introduced in the US this year have been "excessively rapid and ill-designed" and has now urged the government to review its strategy.
According to the IMF the current programme in place would cause harm to the country's growth rate this year.
It has forecast growth of 1.9 per cent in 2013 but said this figure could be as much as 1.75 percentage points higher without the rapid tightening of fiscal policy.
"These cuts should be replaced with a back-loaded mix of entitlement savings and new revenues, along the lines of the administration's budget proposal," the IMF said in its annual report.
However, while the IMF has said the economic recovery in the US had been "tepid", it claims the overall fundamentals had been improving.
A rebound in house prices as well as a boost in construction activity, stronger household balance sheets and an improved labour market have boosted confidence in the US markets.
By Asim Shah