By Peter Schroeder - 10/09/12 02:32 PM EDT
However, if Congress fails to avert the fiscal cliff, the tightening that would come from the automatic spending cuts and expiring tax cuts could throw the U.S. into a "full-fledged recession," the IMF warned. And if that weren't enough, that downturn would spill over into the global economy, as the blow to confidence would sink stock prices. Financial markets could also take another blow if Congress again pushes up against the brink on raising the debt ceiling, which is expected to be required early in 2013.
The IMF currently believes markets are considering going over the fiscal cliff a remote possibility. However, that means that if policymakers do fail to reach a compromise and the current policies take effect, it could substantially rattle markets across the world that have not priced in that risk.