IMF pushes for delay in Fed interest rate hike

International Monetary Fund warns Federal Reserve policy makers over dangers of early rate hike

Photo by: AFP
Photo by: AFP

Updated Jul 28, 2015

A rate hike earlier than 2016 could endanger the growth of the US economy which is still vulnerable to possible economic or political crises, warned the the International Monetary Fund (IMF) on Tuesday. 

Although economists anticipate a rate hike in September, some argue that this is too early as not all incoming data reached expectations. 

According to the IMF, if rates are hiked too soon the anticipated growth for 2015 “which is now projected at 2.5 percent," will be weighed down.

A change in the Federal interest rates not only affects the US economy but also has many global implications. 

The IMF also warned that an early rate hike could spike the dollar, leading to it gaining too much value. As a result companies in emerging markets such as Russia and South Africa would be left with large sums of dollar-denominated debt.

Over the last 12 months the dollar has increased by about 20 percent against a basket of currencies. A further rise in the dollar could lead to “significantly debilitated" growth, said the central bank on Tuesday. 

In the funds report, the Fed also addressed the issue of risks in the US stock markets if rates are raised too early. Share prices "are approaching levels that may be hard to sustain given profit forecasts," it said.

The Fed will be releasing its june FOMC meeting minutes at 18.00 GMT. Investors will be watching the minutes closely as they may give clues on whether or not rates will be hiked later this year.

TRTWorld and agencies