Fed will be able to hike rates gradually, IMF says

Fed will be able to hike rates gradually, IMF says - Capitol Report - MarketWatch


The Federal Reserve will be able to hike rates gradually given slack in the labor market and continued low inflation, according to a report from the staff of the International Monetary Fund released Wednesday.
The IMF staff and the Fed  agree that the first rate hike, or lift-off, will likely come in midsummer of 2015. But after that their rate paths diverge,  with the IMF staff’s  expected rate path well below the median of the estimates of top Fed officials in the latest “dot-plot” released in June.
The IMF staff assumes a rate hike at every other meeting once the central bank starts to tighten, said Nigel Chalk, deputy director of the IMF’s Western Hemisphere Department.
The recent rise in inflation is transitory, Chalk said in a briefing for reporters.
But even if the inflation rate were to top 2%, the Fed could also tolerate it, if it was not accompanied by wage pressure, the IMF staff said.
In their comments to the IMF, Fed officials said they would not intentionally try to overshoot the 2% inflation target, according to the report.