Fed Should Ensure Evidence of Inflation as It Hikes Rates: IMF

(Bloomberg) -- Federal Reserve monetary policy is “on the right track” but the U.S. central bank should take its time as it continues to raise interest rates to allow inflation to advance, according to the International Monetary Fund.

“Future moves in the policy rate should be gradual and dependent on the data, ensuring there are greater signs of wage and price inflation than are currently evident,” IMF spokesman William Murray told a media briefing in Washington on Thursday, the day after the U.S. central bank raised rates and signaled it would hike three times next year.

Fed officials expect inflation to gradually rise toward their 2 percent target over the medium term amid a solid labor market, while acknowledging that price pressures have declined this year and remain below their goal. U.S. consumer prices, excluding food and energy, rose by a less-than-expected 1.7 percent in the 12 months through November.

“At this juncture, our general feeling is that the Fed is on the right track,” Murray said. “As long as the Fed continues to communicate well, its process of policy normalization, helping to minimize market disruption and unwelcome spillovers to other markets, is a good track to be on.”

To contact the reporter on this story: Andrew Mayeda in Washington at amayeda@bloomberg.net.

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Alister Bull, Sarah McGregor

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