|
 Meanwhile one of the Fed's most dovish policymakers appeared to
soften his opposition to that timing, a subtle shift that could pave
a smoother way to the Fed's first rate hike in nearly a decade.
To be sure, New York Fed President William Dudley and Dennis
Lockhart of the Atlanta Fed, speaking separately in New York,
appeared doubtful they would have enough information in hand to lift
rates by an Oct. 27-28 policy meeting, suggesting the Dec. 15-16
meeting is more likely. They also clearly left the door open to
waiting until 2016 if it looks like the U.S. economy is threatened
by a global slowdown.
"Based on my forecast, yes I am" expecting to raise rates this year,
said Dudley, a close ally of Yellen who has a permanent vote on
policy.
"But it's a forecast, and we're going to get a lot of data between
now and December. So it's not a commitment," he said on CNBC TV.
"There certainly is a risk that the economy evolves in a very
different way than I expect, and obviously it would be totally
inappropriate for me to not take that into consideration."
Chicago Fed Chief Charles Evans, who has long said he views waiting
until mid-2016 a more "appropriate" approach, for his part
downplayed the importance of the timing of liftoff so long as the
Fed takes rates up very slowly.
"The precise timing for first increase in the federal funds rate is
less important to me than the path the funds rate will follow over
the entire policy normalization process," he said, suggesting the
rate may need to still be below 1 percent by the end of next year.
The central bank held off on a rate hike last month in the face of a
slowdown in China and elsewhere, financial market turbulence and
falling commodity prices. All of those could keep U.S. inflation,
now at 1.3 percent, below the Fed's 2 percent target.
Since then, disappointing September jobs growth has caused investors
to sharply discount an October rate hike, and to give a December
move about a 40 percent probability, based on futures markets.
Lockhart, a well-respected centrist and a voter on the Fed's
monetary policy committee this year, said the international slowdown
and last month's weak U.S. jobs report show there is "a touch more
downside risk" to the U.S. economy.
Therefore, he said, the Fed will need to monitor the strength of the
consumer in coming weeks and months to decide whether to go ahead
with the first rate hike in nearly a decade.
"The economy remains on a satisfactory track and ... I see a (rate)
liftoff decision later this year at the October or December FOMC
meetings as likely appropriate," Lockhart said of the policy-making
Federal Open Market Committee.
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"However the data are giving off varied signals, and there is more
ambiguity in the current moment than a few weeks ago," he added at a
Society of American Business Editors and Writers conference. This
"calls for especially diligent monitoring of incoming data with
particular attention to consumer activity."
The latest reading on the world's largest economy, a slight drop in
U.S. import prices last month, suggested on Friday that the rate of
imported deflation is slowing.
A Fed rate hike would reverberate through financial markets
globally, depressing foreign currencies and possibly sucking more
capital out of emerging markets in particular.
FOCUS ON DECEMBER
Dudley said "it's possible" that the Fed could begin hiking later
this month, though he questioned whether data between now and then
would give it confidence.
Lockhart, who like Dudley and most other Fed officials once expected
a rate hike around mid-2015, noted that the Fed would have more
information on inflation, the labor market and consumer activity by
December. But he too kept a move in October on the table.
"I hope to avoid the trap of letting one or two months' specific
data overly influence my outlook for the economy overall," he said.
"The ambiguity of the moment reinforces the need to closely watch
the vital signs of the economy over the coming weeks to determine if
the outlook has changed."
(Reporting by Jonathan Spicer; Editing by Meredith Mazzilli)
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