Thursday, June 4, 2015

News Note CNBC: IMF Calls on Fed to Delay Rate Hike Until 2016

The IMF is now calling on the US Fed to wait until 2016 to raise interest rates and also forecasts it will be 2017 before inflation hits the Fed's target rate. All this suggests that once again Fed and other economist forecasts have been too rosy. If the Fed heeds the IMF call, this will also prove out another Jim Rickards forecast that there would be no rate hike in 2015. Rickards has also said he thinks the Fed will actually have to revert back to QE4 sometime in 2016 as well. Below are some quotes from the CNBC article.


"The U.S. Federal Reserve should delay a rate hike until the first half of 2016 until there are signs of a pickup in wages and inflation, the International Monetary Fund said in its annual assessment of the economy on Thursday.

The fund's report comes amid signs that some rate setters at the U.S. central bank are also pushing for rate hikes to be delayed until there are clearer signs of a sustained recovery. U.S. data has been mixed and the economy shrank 0.7 percent in the first quarter.

"Based on the mission's macroeconomic forecast, and barring upside surprises to growth and inflation, this would put lift-off into the first half of 2016," the fund said.
Fed chair Janet Yellen has insisted the economy remains on track and that a rate rise this year is on the cards, although others including Fed governor Lael Brainard, viewed as a centrist on the rate-setting committee, have raised concerns over growth.

The fund forecast that the Fed's favored measure of inflation, the personal consumption expenditures (PCE) reading, would hit the central bank's 2 percent target only in mid-2017."

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