MNI BRIEF: Fed Must Keep Higher Rate Through Next Year- IMF

The Federal Reserve needs to raise its policy rate another 25 basis points to a range of 5.25%-5.5% and hold it there until late next year to deal with stubborn inflation, the IMF's annual review of the U.S. economy published Friday said.

"Rates will need to be somewhat higher for longer," IMF Managing Director Kristalina Georgieva said at a press conference after publishing an annual review of the U.S. economy. "Bringing inflation back to the 2% target will require an extended period of tight monetary policy."

Job data hasn't shown the loosening needed to slow inflation and a higher share of long-term debt has blunted tighter monetary policy so far, the IMF said. "This creates a material risk that the Federal Reserve will have to raise the policy rate by significantly more than is currently expected to return inflation to 2 percent," the IMF report said. (See: MNI INTERVIEW: Companies' Contribution To US Inflation Falling)

The IMF chief urged lawmakers to end the debt limit crisis that creates "a self-inflicted injury" to the world economy. The fund's report also said that "the last few years have seen U.S. fixed income markets prove to be insufficiently resilient under stress" and after the SVB collapse "prudential requirements should be made more stringent for mid-sized banks, subjecting them to similar requirements as larger banks."

Source: IMF