IMF: Fed likely needs to raise rates as soon as late 2022 – Bloomberg

Late Thursday, Bloomberg came out with the headlines from the International Monetary Fund (IMF) that propel the Fed rate hike chatters while saying, “The Federal Reserve probably will need to begin raising interest rates in late 2022 or early 2023 as increased government spending keeps inflation above its long-run average target.”

The IMF’s assessment of countries’ economic and financial developments following meetings with lawmakers and public officials also mentioned, per Bloomberg, that the US central bank likely will begin to scale back asset purchases in the first half of 2022.

Additional key statements (from Bloomberg)…

The IMF forecasts the increase (in Inflation) to be transitory, with the index peaking at 4.3% and dropping to around 2.5% by the end of 2022. 

Fund staff estimates that the higher U.S. spending proposed by President Joe Biden in the infrastructure-focused American Jobs Plan and the social-spending-based American Families Plan -- which have yet to pass -- would increase growth in the gross domestic product by a cumulative value of about 5.25% from 2022 to 2024.

The IMF raised its estimate for U.S. economic expansion this year to 7% -- the fastest pace since 1984 -- from a 6.4% forecast in April.

Fx implications

Given the increased odds of the Fed’s monetary policy adjustments, the latest comments from the IMF can help the US dollar to add some more gains, weighing on the commodity prices. That said, gold halts the two-day recovery mover around $1,776 by the press time of the early Asian session on Friday.

Read: Gold Price Forecast: XAU/USD recovery towards $1,800 awaits US NFP