UPDATE: IMF Urges Fed to Delay First Rate Iincrease Until H116 (FXE) (UUP)

June 4, 2015 9:31 AM EDT

(Updated - June 4, 2015 9:43 AM EDT)

IMF has urged Fed to delay first rate increase until H116, according to Bloomberg headlines.

UPDATE - Earlier Thursday, the International Monetary Fund (IMF) cut its growth outlook for the U.S. to 2.5 percent for 2015. That's down from a 3.1 percent growth outlook issued last April.

The IMF noted the West Coast port strike and collapse of investment in the oil sector as two key factors in its new assessment. Additional metrics include long-term unemployment and high levels of part-time work hampering the labor market.

The IMF said that given significant uncertainty around inflation prospects, the degree of slack and the neutral policy rate, there is a strong case for waiting to raise rates until there are more tangible signs of wage or price inflation.

"A later lift-off could imply a faster pace of rate increases following lift-off and may create a modest overshooting of inflation above the Fed's medium-term goal (perhaps up toward 2.5 percent).

However, deferring rate increases would provide valuable insurance against the risk of disinflation, policy reversal, and ending back at zero policy rates.



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