The International Monetary Fund says the U.S. economy is poised for a gradual, if sluggish, recovery.

The IMF issued its revised forecast Friday, predicting flat economic growth for the U.S. this year, and two percent growth in 2009.

In April, the Fund's economists had predicted the U.S. economy would contract slightly and warned the U.S. credit crisis was threatening to cause a global recession.  But Friday's report said the U.S. slowdown had been "less than feared."

The IMF praised the Federal Reserve's handling of the financial crisis and urged the U.S. central bank to keep interest rates low.  However, the IMF also said the Federal Reserve may need to act quickly and raise interest rates to counter the threat of inflation.

An IMF official, First Deputy Managing Director John Lipsky, also said the U.S. may face further fallout from rising fuel and commodity prices.

Some information for this report was provided by AFP, Bloomberg and Reuters.