speech that carefully weighed overseas threats to the U.S.
economy against expectations of further domestic growth, New
York Fed President William Dudley said risks are "slightly"
tilted to the downside.
The broader committee of Fed policymakers, after raising
interest rates for the first time in a decade in December, has
left policy unchanged and failed to define this key "balance of
risks" in its statements. With early-year market turmoil having
calmed, some Fed officials have said another hike could come in
the next couple of months.
"I judge that a cautious and gradual approach to policy
normalization is appropriate," said Dudley, a close ally of Fed
Chair Janet Yellen and a permanent voter on policy.
Caution, he added in a dovish tone, is needed "because of our
limited ability to reduce the policy rate to respond to adverse
developments, recognizing that we could also use forward
guidance and balance sheet policies to provide additional
accommodation if that proved warranted."
After a weak first quarter of growth, Dudley said he expects the
economy to expand at about 2 percent this year, with
unemployment falling to about 4.75 percent from 5 percent now.
"Although the downside risks have diminished since earlier in
the year, I still judge the balance of risks to my inflation and
growth outlooks to be tilted slightly to the downside," he said
at University of Bridgeport.
Low oil and commodity prices "may signal more persistent
disinflationary pressures than I currently anticipate, while
renewed tightening of financial market conditions could have a
greater negative impact," Dudley said, while "there is
significant uncertainty about economic growth prospects abroad."
(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)
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