Yesterday, the International Monetary Fund called upon the Federal Reserve to delay raising U.S. interest rates until the first half of 2016. The international financial organization also lowered its 2015 forecast for U.S. GDP growth to 2.5%, down from 3.1% previously.
The IMF attributed the downgrade to an unusually long and cold winter, the west coast port strike and the stronger U.S. dollar. Further, the IMF predicted that inflation won’t near the Fed’s 2% target rate until mid-2017.
If the Fed were to raise rates too soon, the IMF believes that this could destabilize international financial markets, and for the most part, I believe the IMF is going to get what it wants.
I do not expect the Fed to raise rates anytime soon. The Fed is dealing with wave after wave of bad news, including downward payroll revisions, a ballooning trade deficit, slowing retail sales, reluctant consumers and declining industrial production.
As evidence of this, the Commerce Department recently revised its estimate for first-quarter GDP to a -0.7% annual pace, lower than its initial estimate of a 0.2% rise. The primary factors were the surging trade gap and lower-than-estimated inventories. These factors will also likely weigh on second-quarter growth. Economists are now expecting the economy to grow at an annual rate of 1% or less in the second quarter.
There is no doubt that disappointing GDP growth is taking a toll. So, the data-dependent Fed cannot raise key interest rates amid all this economic uncertainty and negative GDP growth.
And then there’s the deflationary environment. If the Fed were to raise rates right now, this would boost the U.S. dollar even more and drive down commodity prices. As an investor, what do you think? Consider when in the next year or more, the Fed will likely raise rates.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
