admin October 9, 2018

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The IMF sees the Fed hiking rates in December and four times next year

The good times, such as they were, for the world’s most advanced economies are over, the International Monetary Fund said Monday.

In new forecasts issued in its world economic outlook, the IMF cut its global growth forecast for this year and next to 3.7%, which for both years is 0.2% below its prior forecast in July. This reflects weaker growth in advanced economies, rising trade tensions and higher oil prices.

Recent data show weakening in trade, manufacturing and investment, said IMF chief economist Maurice Obstfeld. Global growth appears to have plateaued.

The Trump tax cuts will help keep the U.S. economy buoyant until 2020 but when this stimulus has run its course and as growth in China continues to slow, “global growth is set to moderate,” the IMF said.

Actual 2017 Forecast for 2018 Forecast for 2019
Global growth 3.7 3.7 3.7
Advanced economies 2.3 2.4 2.1
United States 2.2 2.9 2.5
Euro zone 2.4 2.0 1.9
United Kingdom 1.7 1.4 1.5
Japan 1.7 1.1 0.9
Emerging economies 4.7 4.7 4.7
China 6.9 6.6 6.2
India 6.7 7.3 7.4
Russia 1.5 1.7 1.8
Brazil 1.0 1.4 2.4
Crude oil price $52.81 $69.38 $68.76
CPI – advanced 1.7 2.0 1.9
CPI-emerging 4.3 5.0 5.2

The IMF predicted the Federal Reserve will hike rates in December and four times next year to about a 3.5% rate by the end of 2019.

The agency said its preferred inflation measure, the core personal-consumption expenditure price index, is expected to rise to 2.3% in 2019 and then gradually decline to 2% thereafter.

The IMF lowered its 2019 growth projection for China to 6.2% from 6.4% given the latest round of U.S. tariffs on Chinese imports.

The IMF also cut near-term growth prospects for the euro area, South Korea and the United Kingdom.

The agency said that the global economy remains vulnerable to a sudden tightening of financial conditions.

Many emerging-market economies have higher levels of corporate and sovereign debt, making them more vulnerable to the progressive interest-rate hikes by the Fed.

Capital outflows from emerging-market economies resumed in August after investor sentiment weakened in the wake of the Turkish lira and the Argentinian peso, the agency said.

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