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IMF raises concerns on rate rises

September 4th, 2015

Amid concerns that the vast majority of the leading economies are struggling to meet growth expectations, the International Monetary Fund have called for the prominent central banks of the world to hold back from raising interest rates in the near future. As finance ministers and eminent central bankers are due to meet over the weekend for a G20 discussion on the state of international economies, the IMF are requesting that rates remain low to allow an increase in spending to boost ailing economies.

Warnings that the US Federal Reserve had planned to raise rates over the coming month have led to particular requests by the IMF to consider the move. The fund pointed to a weaker than expected increase to economic fortunes, after slashed oil prices did very little to improve the performance of many economies. The fund stated that, “monetary policy must stay accommodative to prevent real interest rates from rising prematurely.”

The IMF have urged the Federal Reserve to not make any rash moves at this stage, as there is “little evidence of meaningful wage and price pressures so far.” Christine Lagarde, the managing director for the fund, stated in June that, “We believe that a rate hike would be better off in early 2016,” noting that the US economy is on track to grow by 2.5 per cent by the end of 2015. The IMF suggested that the international markets would suffer if the US raised rates, causing further disruption to economic growth for many countries.

In reference to the European Central Bank, the fund proposed that further extensions to the quantitative easing process should be considered. In a statement released by the IMF, it said, “The program should be extended if there is not sufficient improvement in inflation consistent with meeting medium-term price stability objectives.”

Concerns on the state of the global economy have been thrust back to the top of the world leader’s agendas, with the sudden collapse of the Chinese stock market creating wide-spread concern that international growth could be impacted by the now volatile market. The IMF suggested that forecasts for the remainder of 2015 were now effectively defunct, particularly when regarding the fact that growth for the US, Japan and the Eurozone had not yet reached the levels predicted at the start of the financial year.

Issues were noted as being of a higher concern in poorer economy’s, especially where dependence on US based funding and a reliance on demand on China for export were dominant. The fund suggested that, “After six years of demand weakness, the likelihood of damage to potential output is increasingly a concern.” The fund backed this statement by proposing an adjustment in international efforts to improve labour markets, as this would increase demand and growth for the medium term.

Perhaps most concerning is the consistency of the G20 ministers to follow through with agreements made at previous summits. The University of Toronto recently calculated that only 63 per cent of commitments made at last Novembers summit in Brisbane had been adhered to by attending countries.

Article By: Simon Butler, Senior Mortgage Consultant at Contractor Mortgages Made Easy

Media Contact: Raman Kaur, Public Relations Manager

Tel: 01489 555 080

Email: media@contractormortgagesuk.com

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