IMF: Fed rate hike should take US until 2016 – Management Journal

The last mixed US data cause the IMF to rule in favor of postponing the rise in interest rates. Meanwhile, the Federal Reserve insists that the economy remains on track and that rates will rise this year.

(Reuters) .- The Federal Reserve of the United States should take a hike interest rates until the first half of 2016, when there are signs of an upturn in wages and inflation, said the International Monetary Fund ( IMF ) in its annual assessment of the US economy.

The background report comes amid signs that some officials of the Fed also They are pushing to delay the rate hike until there are clearer signs of a sustained recovery of the US economy.

The US data has been mixed and the economy shrank 0.7% in the first quarter.

“Based on the macroeconomic forecast of the mission (a USA ), and except for surprise hikes (indicators) growth and inflation, this should put off ( interest rates) in the first half of 2016, “said the Fund.

The president of the Fed, Janet Yellen, insists that the economy remains on track and that rates will rise this year.

But others such as Lael Brainard, a member of its Board of Governors, which is considered to have a more centrist position within the fixed commission rates have expressed fears for growth.

IMF provides that only in mid-2017, the reading of personal consumption expenditures ( PCE ) -the measurement favorite Fed to reach the inflation target of the central bank’s 2%.

“A subsequent takeoff could mean a faster pace of rate increases and could lead to a modest rise in inflation over the medium-term objective (perhaps an acceleration to 2.5%),” the IMF said.

“However, delaying the rate hike would provide substantial insurance against the risk of deflation, cancellation policies, and return to official interest rates to zero.”

The prolonged period of rates zero interest has led to a hunt for yields on US assets, although the IMF said that at present it had created “pockets of vulnerability” more that “excesses broad-based”.

The Fund warned that a migration of financial intermediation to non-banks that have a more lax regulation and the potential for insufficient liquidity in a range of markets fixed income could lead to “abrupt” moves in pricing in the markets.