Dudley added that markets now see a 60% chance of a rate hike in either June or July.
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At the Fed’s meeting in April, policymakers indicated an increase in rates was likely, assuming the economy and labor market continued to strengthen. Britain’s FTSE 100 index was down 1.5 percent.
The Fed had last signaled its belief that risks were balanced in December when it hiked rates for the first time in almost a decade, raising them from record lows near zero.
Most Asian stock markets sank on Thursday after the Fed surprised investors by signaling that an interest rate hike is in the cards if economic conditions keep improving.
“If I am convinced that my own forecast is sort of on track, then I think a tightening in the summer, the June-July time frame is a reasonable expectation”, said Dudley, a permanent voting member of the Fed’s rate-setting committee. High-dividend stocks fell for a second day as investors braced themselves for the likelihood of an interest rate increase in June at the Federal Reserve’s next policy meeting.
The S&P 500’s dip put the index at its lowest close since late March and left it about flat for 2016.
News that a USA interest rate hike was increasingly likely put particular pressure on energy and commodity shares, as oil prices slumped in response to the greenback’s surge. It was up 0.7 percent this week and has risen 2.4 percent in the past three weeks.
The Dow Jones industrial average closed down 91.22 points, or 0.52 percent, at 17,435.40, the S&P 500 closed down 7.59 points, or 0.37 percent, at 2,040.04 and the Nasdaq composite closed down 26.59 points, or 0.56 percent, at 4,712.53.
Sydney-listed mining giant BHP Billiton slumped 3.7 percent Thursday, Rio Tinto dived 3.3 percent and Woodside Petroleum slid 1.2 percent.
“What we need most, now that we are near full employment and approaching our target inflation rate, is faster potential growth”, Federal Reserve Vice Chairman Stanley Fischer told an economics conference in NY.
The dollar held at its highest in almost two months against a basket of major currencies early on Friday, on track for a third week of gains as investors positioned themselves for an early rate hike. Yields, which move inversely to prices, had climbed to their highest in about two months for shorter-dated maturities after the Fed’s minutes were released. Hong Kong’s Hang Seng .hsi added 0.9 percent, on track for a rise of 0.5 percent for the week.
“The narrative changed from cautious, very cautious to something more constructive in terms of the economy”.
Crude oil prices fell as the dollar’s surge drove players from the oil market.
The dollar was last up 0.52 percent against the yen at 110.52 yen, just below its more than three-week high against the currency.
Oil prices sharply pared losses as supply worries offset the drag from the dollar.
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Benchmark U.S. crude oil fell 3 cents to close $48.16 a barrel in NY. Treasury yields rose, with the yield on 30-year USA government debt rising to a two-week high.
