IMF Looks for Better 2014 to 2015 Growth

Tuesday’s updated outlook shows that the recovery is strengthening on an uneven field. The IMF’s take is that the global activity has broadly strengthened. It is also that the growth is expected to improve further in 2014 to 2015.

The expectation is that the growth will come from advanced economies. One thing stands out that Fed watchers may look at closely: advanced economy policymakers need to avoid a premature withdrawal of monetary accommodation. The IMF said:

Although downside risks have diminished overall, lower-than-expected inflation poses risks for advanced economies, there is increased financial volatility in emerging market economies, and increases in the cost of capital will likely dampen investment and weigh on growth.

Another observance is that emerging market economy policymakers should adopt measures with several goals:

• To adapt to changing fundamentals
• To facilitate external adjustment
• To further monetary policy tightening
• And to carry out structural reforms

Another key observation that Fed watchers will take is that the IMF expects that global rates likely will rise in the medium term, but only moderately.