Fed should wait with liftoff to see firm inflation signs: IMF

The US Federal Reserve (Fed) should wait to see firm signs of rising inflation as well as a stronger labour market before hiking benchmark interest rates, an International Monetary Fund (IMF) paper said on Thursday.

In a report prepared for the upcoming Group of 20 meeting in Turkey, IMF staff said spare economic capacity and very low inflation justified keeping monetary policy loose in most major advanced economies.

The contrast between rising US rates and probable further easing in other developed countries was one risk overshadowing the global outlook, along with a shift in gears in China and an end to the commodities super cycle, the surveillance note said.

"The Federal Open Market Committee's (FOMC) decision should remain data-dependent, with the first increase in the federal funds rate waiting until continued strength in the labour market is accompanied by firm signs of inflation rising steadily toward the Federal Reserve's 2 per cent medium-term inflation objective," said the note, which does not necessarily reflect the views of the Fund's executive board.