Dudley, in clear signal,
expects Fed rate hike this year
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[October 20, 2016]
By Jonathan Spicer
NEW
YORK (Reuters) - The Federal Reserve will likely raise interest rates
later this year if the U.S. economy remains on track, one of the most
influential Fed officials said on Wednesday in perhaps the clearest
policy signal yet from the central bank.
"If the economy stays on its current trajectory I think ... we'll see an
interest rate hike later this year," New York Fed President William
Dudley told a modest dinner gathering at the Lotos Club, downplaying any
market-related risks of tightening monetary policy in December.
Dudley, a permanent voter on policy and a close ally of Fed Chair Janet
Yellen, added that a quarter-point hike this year "is not really that
big a deal" given the economy is "reasonably close" to the Fed's goals
of 2 percent inflation and maximum sustainable employment.
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The Fed left rates unchanged at 0.25-0.5 percent last month, though
published forecasts showed that most of its 17 policymakers expected a
hike before year end. Economists and traders now expect the Fed to again
stand pat at its next meeting, a week before the U.S. election on Nov.
8, but to finally hike in December.
Dudley's comments appeared to reinforce that notion.
Asked about the risk of raising rates in December as investment funds
wind down bets and as banks trim balance sheets for year-end, Dudley,
who also oversees the Fed's market operations, said he was "definitely
not worried about the timing" given the Fed smoothly hiked rates from
near zero last December. That was the first time in almost a decade that
the Fed raised rates.
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![](../images/102016pics/busine46.jpg)
New York Fed President William Dudley takes part in a panel convened
to speak about the health of the U.S. economy in New York November
18, 2015. REUTERS/Lucas Jackson
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"We have made quite good progress toward our objectives ... so clearly
as we get closer to our objectives it's likely that we'd want to make
monetary policy somewhat less accommodative," he said.
"That's quite different than saying there is this urgency to tighten
policy aggressively," he said. "I don't see that urgency," he added,
because unemployment has recently remained flat around 5 percent,
inflation is still below target and also because of the economy's
sub-par growth rate.
(Reporting by Jonathan Spicer; Editing by Leslie Adler)
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