Lockhart is considered a centrist on the Fed’s policy-setting panel, which is set to consider its first rate hike in almost a decade when it meets next month.
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Despite Dudley’s doubts, for some, the positive economic data reports from the last couple of weeks are enough.
“Don’t panic”-that was the message from the president of the Federal Reserve Bank of New York, William Dudley, amid the ongoing upheaval of financial markets around the globe”. Prices for swaps on Wall Street implied traders saw a 24 percent probability for a September move, down from 46 percent a week earlier, according to Tullett Prebon data.
Barclays thinks the market has bullied the Fed into doing nothing.
But on Monday, Atlanta Fed President Dennis Lockhart reaffirmed his stance that a rate hike will happen this year.
Widespread concerns remained over whether Chinese authorities were doing enough to calm the markets and sustain economic activity at the current level, despite the injection of hundreds of billions of yuan into markets to support stocks and the currency itself.
As part of Monday’s sell-off, investors also scaled back their own bets on long-term U.S. inflation.
Campaign director for Fed Up Ady Barkan said that before Fed officials, “can have a real discussion of raising interest rates and slowing the economy, they should understand firsthand who it would effect”.
“It’s important not to overreact to short-term market developments because it’s unclear whether this will just be a temporary adjustment or something more persistent that will have implications for U.S. growth and the inflation outlook”, Dudley said.
Dudley also said he was “far away from the conversation of quantitative easing at this point”, in response to speculation the Fed might be be forced to resume bond purchases in order to shield the U.S. from a global slowdown.
Despite the wild see-sawing of US stocks after China’s “Black Monday” meltdown, the bet is on the central bank to move soon and start weaning the US off rates that have stayed near zero since 2008.
The remarks were particularly striking because Dudley has said previously that he does not want the Fed to surprise markets.
Treasury 10-year yields fell below 2pc for the first time since April of this year and inflation expectations have dropped to the lowest since January as the greenback’s gains versus major peers drive down the cost of imports and with crude oil sliding to six-year lows.
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But China’s slowdown is weighing on economies across the world. Overall, investors should be hoping that the Fed raises rates in September because if they do, more likely than not, equity markets will be significantly higher come September 2016.
