Financial risks growing at US insurers, mutual funds

The fund also repeated its view that the Fed should hold off raising rates until the first half of 2016, when wage and price inflation are expected to pick up.

Fed Chairwoman Janet Yellen has maintained that the US economy is growing slowly but steadily, and if the data keeps up, the central bank could be prepared to raise rates sometime in the upcoming months. Acting too quickly could actually hurt the economy and force the Fed to lower rates to deal with the damage, undermining its goal of returning to regular monetary policy and the institution’s own credibility, the IMF cautioned.

“Regardless of the timing, higher USA policy rates could still result in significant market volatility and financial stability consequences that go well beyond USA borders”.

The Fund found that the dollar is already moderately overvalued.

State Bank of India chief economist Soumya Kanti Ghosh said other external factors remaining constant, robust growth in the USA will have a positive impact on the Indian economy, especially through a boost in Indian exports. “A solid labour market, accommodative financial conditions, and cheaper oil should support a more dynamic path for the remainder of the year”, the report found. The International Monetary Fund predicted an acceleration in gross domestic product growth from 2.5 per cent this year to 3 per cent next.

The fund’s warning comes as lawmakers and policy makers prepare to mark the fifth anniversary of the 2010 law, which was designed to insulate the financial system against a repeat of the 2008 crisis.

If the US currency were to appreciate markedly, that could create concerns, including in some emerging market economies, and the potential for a rise in global imbalances.

The fund can provide technical assistance to Greece, if the country asks for help from the IMF.