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IMF warns Fed to wait on rate hike

Thursday, June 04, 2015 - 01:37

The International Monetary Fund says, the U.S. Federal Reserve should delay a rate hike until the first half of 2016. Bobbi Rebell reports.

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A big warning from the International Monetary Fund to the U.S. central bank: Hold off on rate hikes until the first half of 2016. The concern: wages and inflation. The recommendation coming from the IMF's annual assessment of the economy. IMF Managing Director Christine Lagarde: SOUNDBITE: CHRISTINE LAGARGE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND (ENGLISH) SAYING: "The Fed's first rate increase in almost nine years has been carefully prepared and telegraphed. Nonetheless, regardless of the timing, higher U.S. policy rates could still result in significant market volatility with financial stability consequences that go well beyond the U.S. borders." Fed chair Janet Yellen has insisted the economy remains on track, and that a rate rise this year is in the cards. The IMF, however, is also concerned about the Personal Consumption Index, which the Fed uses to measure inflation. They believe, it won't hit the central bank's two percent target until mid-2017, yet another reason to take a little more time, to assess the economic climate. SOUNDBITE: CHRISTINE LAGARGE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND (ENGLISH) SAYING: "Even after this first rate increase, a gradual rise in the Federal Funds rate will likely be appropriate. Such a path may create a modest rise of inflation above the Fed's medium term goal perhaps up towards 2.5 percent, and we believe that that would be manageable. " The IMF believes waiting a little longer to raise rates would also avoid having to reverse course, and go back to near zero interest rates.

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IMF warns Fed to wait on rate hike

Thursday, June 04, 2015 - 01:37