Yesterday, the International Monetary Fund (IMF) made it clear the U.S. Federal Reserve should not raise interest rates until 2016, citing an over-valued dollar and unsustainable share values. Publishing its regular update on the world’s largest economy, the IMF said the U.S. would be advised to retain its current 0.25% rate into the first half of next year, and only then, consider a gradual increase. The IMF considers a rate rise, predicted by many to happen this September, to be a clear risk when the U.S. currently has both economic and political threats to its growth, which could be “significantly debilitated.”
In the past year, the dollar, considered by the IMF to be over-valued, has risen 20% against a host of other currencies. The IMF believes that a rate increase now would exacerbate that, and, coupled with weaker global growth, particularly in China, the result would be reduced exports and reduced investment in the U.S. economy. Furthermore, the IMF has concerns over current U.S. share value prices, saying that they “are approaching levels that may be hard to sustain given profit forecasts.” Lastly, the IMF highlighted the economic risks of panic selling by investors – something we are seeing very clearly in China’s stock market right now.
The IMF’s regular health check for the U.S. economy should give us all cause for concern. If you think this government needs a desperate review of its economic policies, please Like & Share this post.