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IMF asks US Federal Reserve to delay rate rise IMF asks US Federal Reserve to delay rate rise
(35 minutes later)
In an unusual move, the International Monetary Fund urged the US central bank to delay any rise in interest rates until 2016.In an unusual move, the International Monetary Fund urged the US central bank to delay any rise in interest rates until 2016.
IMF managing director Christine Lagarde said the Federal Reserve should wait to see "more tangible signs of wage or price inflation".IMF managing director Christine Lagarde said the Federal Reserve should wait to see "more tangible signs of wage or price inflation".
The IMF believes that "pockets of vulnerability" in the US economy have emerged.The IMF believes that "pockets of vulnerability" in the US economy have emerged.
These could cause serious trouble for the wider economy, Ms Lagarde said.These could cause serious trouble for the wider economy, Ms Lagarde said.
She also said that a gradual rise in the US benchmark federal funds rate would be appropriate, while higher rates could cause market volatility. "Deferring rate increases would provide valuable insurance against the risk of disinflation, policy reversal and ending back at zero policy rates," the IMF's report said.
Ms Lagarde added that the IMF recognised the work that the US had done. And because of the global implications of a rate rise, communication from the Federal Reserve was vital, it added. The fund suggested monthly press conferences from the central bank. Currently they have six a year.
In the IMF's annual assessment of the US economy, she said rate decisions should be data dependent.
Many Washington watchers have predicted an interest rate rise this year.Many Washington watchers have predicted an interest rate rise this year.
But recent economic reports have been mixed, including data showing that the US economy shrank an annualised 0.7% in the first quarter. 'Potential risk'
But recent economic reports have been mixed, including data showing that the US economy shrank by an annualised 0.7% in the first quarter.
The IMF said this would "unavoidably pull down 2015 growth, which is now projected at 2.5%". For 2016, the forecast is for 3%.
That is still better than Wednesday's projection from the think-tank, the OECD, which cut its forecast to 2% for this year.
Ms Lagarde also said commented on the US dollar, saying the IMF believes it is moderately overvalued.
That marks a change compared with a previous assessment.
"Continued over appreciation is a potential risk and should not be discounted," she said.
On Greece, she said that she was "confident" that the Greek prime minister would keep his word when he had said "don't worry" about the next payment due on Friday.