New York Federal Reserve Bank President William Dudley said on Thursday he does not need to see an actual rise in inflation before agreeing to raise interest rates as long as labor markets continue to improve.
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“I think disagreement about whether the economy will be strong enough [to withstand a rate rise] is a realistic one given the economy is growing only slightly above trend, the unemployment rate is coming down very, very slowly, the recent economic news suggests the economy is slowing”, he told an audience at Brookings, a Washington-based think-tank.
Many Fed watchers are exasperated by the mixed messages from the USA central bank in recent weeks.
Mr Dudley said the USA domestic economy continued to “perform well”, while he said consumption was growing at a “decent clip”.
McCarthy warned against the planned reduction, citing Taliban gains in Afghanistan.
For his part, he sees the Fed raising rates later this year if his forecast about the economy is correct.
He argued against strict monetary policy rules, saying they would have slowed the Fed’s response to the financial crisis.
Other members, including Chairwoman Janet Yellen, have suggested that rate increases are in store this year. Notably, two of Yellen’s colleagues on the Board of Governors, Daniel Tarullo and Lael Brainard, said this week that it would be better for the Fed to wait. And the strong dollar has hit U.S. exports, another drag on economic growth. He added that he does not support “total discretion” in monetary policy.
While Mr Dudley insisted that the Fed had been transparent in its communications, economist John Taylor, who appeared on a panel with Mr Dudley, shot back: “Are you kidding?”
Speaking alongside a top proponent of the idea that central banks should follow clear rules, Dudley said such rules were useful but they oversimplified how the economy really works.
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The Fed’s statements are “just maddening”, Plosser said in remarks reported by MarketWatch. “I think we’re pretty much all on the same page”.
