Dudley Sees Fed Rate Rise by Year-End If Data on Track

  • Dudley says he sees no urgency for aggressive tightening
  • New York Fed chief sees central bank close to its objectives

Federal Reserve Bank of New York President William Dudley repeated that he expects an interest-rate increase by the end of 2016, as the central bank draws closer to reaching its twin objectives of maximum employment and 2 percent inflation.

“I do expect to see an increase later this year,” Dudley said Wednesday in response to an audience question after giving a speech in New York, adding that his forecast depends on the economy staying on its current trajectory. “There is not a lot of urgency to tighten monetary policy aggressively because we don’t have an inflation problem.”

Inflation has been below policy makers’ goal for four years and is only expected to rise gradually to 2 percent. That’s bolstered the arguments of officials who want the U.S. central bank to show patience, as the policy-setting Federal Open Market Committee discusses when to adjust its stance.

The FOMC next meets in Washington on Nov. 1-2, a week before the U.S. presidential election, though investors see a much higher probability of a move at their following meeting, in mid-December. Dudley said that every meeting is “live.”

The New York Fed chief also said he sees more slack in the U.S. labor force than the current unemployment rate of 5 percent conveys. He also said that though policy is still easy, there isn’t much power behind it. “Monetary policy is accommodative, but it’s not that accommodative.”

(Corrects day of remarks in second paragraph, to Wednesday instead of Thursday.)
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