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(Bloomberg) -- The U.S. Federal Reserve will struggle to raise interest rates this year amid weak economic growth abroad and slow inflation at home.

That was the message from Goldman Sachs Group Inc. President Gary Cohn, former U.S. Treasury Secretary Lawrence Summers and other delegates on a Bloomberg Television panel at the World Economic Forum’s annual meeting in Davos, Switzerland.

Their comments challenge expectations in financial markets and among most economists that Fed Chair Janet Yellen and colleagues will raise their benchmark rate this year from near zero in the first upward shift since 2006 as the U.S expansion accelerates.

“The U.S. is growing and that’s a non-debatable fact,” Cohn said at the Alpine conference. “What I am concerned about is the ability of the U.S. to raise rates with what’s going on with the rest of the world.”

“The Fed should not be fighting against inflation until it sees the whites of its eyes,” said Summers, now a professor at Harvard University. “That is a long way off.”

Fed officials are already starting to review their outlook for the world’s largest economy as global weakness and disappointing data on U.S. consumer spending test their resolve to raise rates in 2015.

Watching the ECB

The reassessment comes as slowing inflation yesterday led the Bank of Canada to unexpectedly cut interest rates and as the European Central Bank is expected to begin quantitative easing today. At about 2:30 p.m. in Frankfurt, the European Central Bank President Mario Draghi will probably commit to a program that may exceed 1 trillion euros ($1.2 trillion).

The International Monetary Fund this week cut its forecast for inflation in advanced nations almost in half to 1 percent for this year.

“There are a lot of dis-inflationary pressures upon us,” said Banco Santander SA Chairman Ana Botin, who was also on the panel.

Such monetary easing internationally when Fed policy makers are considering tightening has lifted the dollar 17 percent against the euro and 13 percent versus the yen in the past year. That risks pinching the U.S. by hurting its exporters and restraining import prices.

“It will only get stronger if we raise rates,” said Cohn.

Deflationary Pressure

As for the Fed’s preferred inflation gauge, the personal consumption expenditures price index rose 1.2 percent in November from a year earlier and has lingered below the Fed’s 2 percent goal for 31 straight months. Hourly wages also dropped last month in a sign the pay packets of workers may not yet be benefiting from a healthier labor market.

“As long as the net pressure is towards deflation they should not be looking to move,” Summers said of the Fed.

He also advised Yellen and colleagues to pay “careful attention to communication policy” given a disparity in what the Fed is saying and expectations of financial markets.

Not all in Davos are shelving bets the Fed will soon tighten monetary policy. The U.S. unemployment rate stood at 5.6 percent in December, the lowest since June 2008 and just above the top end of the Fed’s 5.2 percent to 5.5 percent estimated range for full employment.

‘Lost Their Power’

“The Fed is probably going to raise rates this year,” IMF Managing Director Christine Lagarde said on the Bloomberg panel.

“The fact that the Fed is going to do this is good news,” Lagarde said. It might even “prove useful” for the world economy if the ECB is easing monetary policy when the Fed is tightening it.

Sitting alongside her, Ray Dalio, who runs the investment firm Bridgewater Associates LP, said he was worried that central banks are now out of ammunition and so have little scope to combat any fresh weakening.

“We’re in a new era in which central banks have largely lost their power to ease,” he said, noting that the peak in rates for every economic cycle since 1980 has been lower than that of the previous expansion. “I worry about the downside because the downside will come.”

Such an environment leaves policy makers increasingly reliant on weakening currencies to stimulate demand, said Dalio, predicting declines in the euro and the yen. The result is a 1980s-style “short squeeze” that is already emerging in the dollar as those who borrowed in it find their debts turning more expensive.

“The prevailing view is one of the easier ways to stimulate economic growth is to have a low currency,” said Cohn. “It makes sense.”

--With assistance from Keith Campbell in London and Harris Braude in Davos.

To contact the reporters on this story: Simon Kennedy in Paris at skennedy4@bloomberg.net; Francine Lacqua in London at flacqua@bloomberg.net To contact the editors responsible for this story: Andrew J. Barden at barden@bloomberg.net Chad Thomas

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The citizens' meeting

The citizens' meeting

The citizens' meeting