UK

IMF asks US Federal Reserve to delay rate rise

Christine Lagarde Image copyright Getty Images
Image caption The IMF's Christine Lagarde has called for caution

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".

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.

"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.

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.

Many Washington watchers have predicted an interest rate rise this year.

'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.

More on this story

Related Internet links

The BBC is not responsible for the content of external Internet sites