IMF urges Fed to let inflation overshoot
The forecast for growth this year was cut to 2.2% from 2.4%. The 2017 forecast was left unchanged at 2.5%. The latest Fed forecasts are for 2.0% in 2016 and 2017.
"The path for policy rates should accept some modest, temporary overshooting of the Fed's inflation goal to allow inflation to approach the Fed's 2 percent medium-term target from above," the IMF writes.
On the US dollar, they said it was overvalued by 10-20% with forecasts to show the current-account deficit will rise above 4% of GDP by 2020.
As for recommendations, here's the quick list:
- Infrastructure spending
- Boost the earned-income tax credit
- Boost minimum wage
- Improve labor market participation
- Eliminate corporate tax loopholes
- Cut the overall corporate tax rate
"The near-term U.S. growth prospects are good despite the recent temporary setbacks," Lagarde said in a statement.
The IMF has consistently argued the Fed should be more dovish and the report says hikes should be "very gradual."
