The IMF called on the Fed to delay raising rates until 2016 – FORTUNE

NEW YORK (Reuters) – The Federal Reserve of the United States should take up interest rates until the first half of 2016, when there are signs of a rebound in wages and inflation, said Thursday the International Monetary Fund in its annual assessment of the economy.

The background report comes amid signs that some officials at the central bank are also pushing to delay the rate hike until there are clearer signs of a sustained recovery.

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

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

The Fed President 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.

The IMF predicts that only in mid-2017, the reading of personal consumption expenditures (PCE) -the Fed’s favorite measure of inflation to reach the objective of the Central Bank of 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%),” he said background.

“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 long period of zero interest rates has led to a hunt for yields on US assets, although the IMF said that at present it had created “pockets of vulnerability” rather than “over-broad base “.

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 fixed income markets movements could lead to “abrupt “in setting market prices.