The United States needs to raise taxes and cut spending to address the looming fiscal cliff, IMF chief Christine Lagarde said Sunday, warning that anything less would undermine economic confidence.

With President Barack Obama and Republican lawmakers stuck in an apparently ideological battle on how to address the nation's ballooning deficit by the end of 2012, Lagarde said the cliff remained the biggest threat to the economy.

Speaking on CNN's "State of the Union" talk show, she said that although the US economy was creating jobs, American debt was still higher than in much of the eurozone and cautioned against more half-baked, short-term measures.

"The best way to go forward is to have a balanced approach that takes into account both increasing the revenue, which means raising tax or creating new sources of revenue, and cutting spending as well," Lagarde said.

The so-called fiscal cliff refers to a combination of severe tax increases and spending cuts due in January.

Obama won November's presidential election on a platform of tackling the nation's deficit and debt by raising taxes for the wealthiest Americans, but Republicans are opposed to higher rates being placed on anyone.

News: The Daily Star/Bangladesh/10th-Dec-12