By Andrea Shalal
WASHINGTON, Oct 29 (Reuters) – The US Federal Reserve is appropriately keeping a close watch on US economic data as it shapes its monetary policy, the International Monetary Fund said on Thursday, a day after the US central bank left its key interest rate unchanged.
IMF spokesperson Julie Kozack told reporters at a regular briefing that the IMF fully supported comments from Fed Chair Kevin Warsh about the Fed’s focus on price stability, noting that US headline inflation remained above the Fed’s 2% target.
She said the Fed and the European Central Bank, which both left interest rates unchanged at policy meetings this week, were operating in an environment of high uncertainty, and needed to look closely at economic data as they moved forward.
ARGUMENTS FOR RATE RISE
The US Commerce Department on Thursday reported that the US economy grew at its fastest pace in a year in the third quarter, shrugging off higher oil prices stemming from the conflict in the Middle East as consumers maintained robust spending and businesses doubled down on investment in AI.
The advance GDP report was published less than a week before Tuesday’s midterm elections, which will determine control of Congress. Economists said the strong growth, together with other data on Thursday showing inflation accelerating and broadening out in September, bolstered the argument for the Federal Reserve to raise interest rates in December.
The US central bank on Wednesday left its benchmark overnight interest rate in the 3.75% to 4.00% range while acknowledging that inflation “remains elevated.”
FOCUS ON PRICE STABILITY
“The Fed decided to remain on hold yesterday, following a rate hike in September, and the Fed is appropriately remaining data dependent while it’s acknowledging the continued strength of the US economy and the upside risks to inflation,” Kozack said.
Over time, she said, it was very important for the Fed to “remain focused on price stability and to act as needed to bring inflation down.”
Kozack said growth has been strong in the United States, driven by private consumption – despite higher oil prices and inflation – and investment. Growth was being supported by productivity gains, with output per hour having grown by 2.5% per year, well above rates seen both before the COVID pandemic and in other countries.
But she noted that productivity gains were not as widely shared, particularly in the technology sector and associated with very strong equity markets, and the US should work to ensure that those gains continued to broaden.
(Reporting by Andrea Shalal and Rodrigo Campos; Editing by David Holmes)
