The fed risks triggering further dollar strength, which will lead to a significant drop in exports due to uncompetitive of the national currency, sums up the Fund.
WASHINGTON, 30 Oct. The rise in interest rates by the Federal reserve system of the USA can lead to increased economic instability in the United States and the world, as a result, the fed may have to go back to the program easing, according to a review of the International monetary Fund (IMF).
“Raising (the base rate — ed.) may take place against the background of great uncertainty, weaken the labour market, lead to a neutral growth rate of inflation and wages in the U.S.,” say analysts at the Foundation in the analysis, the summit of G20 leaders in Turkey in mid-November.
In addition, this can lead to sudden “changes in the structure of international portfolios, high market volatility and increasing the period of collecting premiums investors, which will have implications for global financial stability”.
If negative concerns of the Foundation are met, the growth rates will be “brake recovery, and may force the fed to act in the opposite direction.” The fed risks triggering further dollar strength, which will lead to a significant drop in exports due to uncompetitive of the national currency, sums up the Fund.
On Wednesday the U.S. Federal reserve once again kept its base rate at a minimum level of 0-0. 25%, as analysts expected. While the regulator did not rule out a rate hike in December, depending on the dynamics of key macroeconomic indicators — employment and inflation. Commenting on the situation in the economy, the regulator described the growth as “moderate.”
News of possible increase in rates before the end of the year led world markets into negative in September. Later, the situation had smoothed out on the weakening of these expectations. But on Thursday, after news that in December the rate may be raised, main world stock indices closed the trading day in the red. The fed last raised the base rate 29 June 2006. In 2007-2008, the regulator gradually reduced rate until, until it reached the lowest level of 0-0,25%.