In a message dated 8/5/99 6:10:24 PM Central Daylight Time, AOL News writes: << Subj: IMF: Fed Needs To Raise Rates Date: 8/5/99 6:10:24 PM Central Daylight Time From: AOL News BCC: Ahab42 IMF: Fed Needs To Raise Rates .c The Associated Press By MARTIN CRUTSINGER WASHINGTON (AP) - The United States should consider further increases in interest rates to keep its economic expansion from falling victim to rising inflation, the International Monetary Fund said Thursday. The IMF, releasing for the first time a summary of the discussions its 24-member executive board as part of its annual review of the U.S. economy, said directors were worried that unless the Federal Reserve acted soon, it could require even larger rate hikes down the road to combat inflation, raising the risks of a sharp stock market correction and possible recession. ``Directors cautioned that the economy still faced resource constraints, and the recent very strong growth in domestic demand could not be sustained for much longer without having inflationary consequences,'' the IMF summary said. The IMF report noted that the Federal Reserve had raised a key interest rate by a quarter point on June 30. That was the first increase in two years in the federal funds rate, the interest that banks charge each other. There is growing concern in U.S. financial markets that the Fed will boost rates a second time when officials meet Aug. 24. The IMF summary said that members of its executive board were worried that a single rate rise would not be enough to slow the U.S. economy to a more sustainable pace. ``Many directors considered that, unless there was evidence soon that the strength of demand was abating, the authorities should tighten monetary policy further to ensure that the expansion remained on a sustainable noninflationary path,'' the IMF summary said. ``They emphasized that waiting too long to act would risk having to raise interest rates more sharply later to stem a pickup in inflation, which would increase the likelihood of a sharp stock market correction,'' the IMF said. The 182-nation IMF, which took the lead in handling the global currency crisis, noted its executive board was not unanimous about the need for further U.S. rate increases. ``Some other directors, however, were less inclined to think that an increase in interest rates would be called for in the near future,'' the summary said. The release of the summary of the board's discussions on the U.S. economy was part of a pilot program adopted in April under which the agency will release greater detail on its annual economic reviews if authorized to do so by the member country. Critics charged that IMF secrecy was one of the contributing factors that triggered the Asian currency crisis because it allowed investors to be caught by surprise at the severity of economic conditions in a number of crisis countries. AP-NY-08-05-99 1909EDT Copyright 1999 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without prior written authority of The Associated Press. Announcement: America Online has added Reuters newswires to News Profiles. To add Reuters articles to your daily news delivery, go to KW: <A HREF="aol://5862:146">News Profiles</A> and click on "Modify Your News Profiles." Then click "Edit" and add Reuters from the list on the left. To edit your profile, go to keyword <A HREF="aol://1722:NewsProfiles">NewsProfiles</A>. For all of today's news, go to keyword <A HREF="aol://1722:News">News</A>. >>
IMF: Fed Needs To Raise Rates .c The Associated Press By MARTIN CRUTSINGER WASHINGTON (AP) - The United States should consider further increases in interest rates to keep its economic expansion from falling victim to rising inflation, the International Monetary Fund said Thursday. The IMF, releasing for the first time a summary of the discussions its 24-member executive board as part of its annual review of the U.S. economy, said directors were worried that unless the Federal Reserve acted soon, it could require even larger rate hikes down the road to combat inflation, raising the risks of a sharp stock market correction and possible recession. ``Directors cautioned that the economy still faced resource constraints, and the recent very strong growth in domestic demand could not be sustained for much longer without having inflationary consequences,'' the IMF summary said. The IMF report noted that the Federal Reserve had raised a key interest rate by a quarter point on June 30. That was the first increase in two years in the federal funds rate, the interest that banks charge each other. There is growing concern in U.S. financial markets that the Fed will boost rates a second time when officials meet Aug. 24. The IMF summary said that members of its executive board were worried that a single rate rise would not be enough to slow the U.S. economy to a more sustainable pace. ``Many directors considered that, unless there was evidence soon that the strength of demand was abating, the authorities should tighten monetary policy further to ensure that the expansion remained on a sustainable noninflationary path,'' the IMF summary said. ``They emphasized that waiting too long to act would risk having to raise interest rates more sharply later to stem a pickup in inflation, which would increase the likelihood of a sharp stock market correction,'' the IMF said. The 182-nation IMF, which took the lead in handling the global currency crisis, noted its executive board was not unanimous about the need for further U.S. rate increases. ``Some other directors, however, were less inclined to think that an increase in interest rates would be called for in the near future,'' the summary said. The release of the summary of the board's discussions on the U.S. economy was part of a pilot program adopted in April under which the agency will release greater detail on its annual economic reviews if authorized to do so by the member country. Critics charged that IMF secrecy was one of the contributing factors that triggered the Asian currency crisis because it allowed investors to be caught by surprise at the severity of economic conditions in a number of crisis countries. AP-NY-08-05-99 1909EDT Copyright 1999 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without prior written authority of The Associated Press. Announcement: America Online has added Reuters newswires to News Profiles. To add Reuters articles to your daily news delivery, go to KW: <A HREF="aol://5862:146">News Profiles</A> and click on "Modify Your News Profiles." Then click "Edit" and add Reuters from the list on the left. To edit your profile, go to keyword <A HREF="aol://1722:NewsProfiles">NewsProfiles</A>. For all of today's news, go to keyword <A HREF="aol://1722:News">News</A>.
