It could also drive the dollar higher, with more negative consequences for US exports
The International Monetary Fund (IMF) on Friday urged the Federal Reserve to be cautious on raising rates, warning that tightening too fast could force it to reverse and possibly lose credibility.
In a review of the world’s top industrial economies ahead of the G-20 summit in Turkey, the IMF said the US and the global economy face risks tied to the impending rate hike, which would be the first in more than nine years.
While a rate rise could happen “amid large uncertainty about slack in labor markets, the neutral policy rate and the path for inflation and wages.” It said an increase in the Fed’s benchmark rates could spark “abrupt” shifts in global investment portfolios and high market volatility.
Domestically, the IMF added, “should financial conditions tighten more than warranted by cyclical conditions, it may become a drag to the recovery, and force the Fed to reverse direction.” It could also drive the dollar higher, with more negative consequences for US exports.
Published in The Express Tribune, November 1st, 2015.
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