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  • IMF Urges Fed Not To Raise Interest Rates Until 2016

    On Thursday of last week, the International Monetary Fund downgraded its forecast for US economic growth this year from 3.1% earlier in the year to only 2.5% now. That is not surprising in light of the mainly disappointing economic reports we’ve seen recently, and other forecasters have been revising their estimates lower as well.

    Yet in addition to the downwardly revised growth forecast, the new IMF report openly called on the Federal Reserve to delay any interest rate hike until sometime next year. In all of my years of Fed-watching, I don’t remember the IMF ever trying to influence Fed monetary policy. This is an unusual development, and it will be very interesting to see how it plays out.

    The question is whether Fed Chair Janet Yellen and her fellow members of the policy setting Committee pay much, if any, attention to what the IMF has to say. We all know that the Fed really wants to raise short-term rates to give it some ammunition for the next recession.

    This apparent disagreement is between two of the most powerful women in the world – Christine Lagarde, head of the IMF, and Fed Chair Janet Yellen. This issue will be our main topic today.

    But as we often do, let’s first take a look at Friday’s stronger than expected unemployment report for May and the latest disappointing report on consumer spending.

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