“When you have a close decision like that, it doesn’t take a lot of information to tip the balance”, Williams said in a question session with reporters, explaining that a rate increase is on-the-table at the Fed’s next meeting in October.
The economist survey shows that most forecasters who called for a rate increase in September pushed back to December, rather than moving their projection into October or 2016.
While the Fed’s preferred inflation measure is 1.3% now, Dudley’s contention that it could rise to 2% next year is more bullish than the views of many of his colleagues.
Mr. Williams’s remarks mirrored concerns raised by Federal Reserve Chairwoman Janet Yellen during a speech last week, suggesting that with rates stuck near zero since 2008, Fed officials are weighing the risks of creating new asset-price bubbles.
“To understand why inflation has remained low despite an economy nearing full employment, we have to look beyond our shores”, Williams said. The benchmark seven-day collateralized lending rate was kept at 6.25 percent, in line with economists’ expectations. He said this may mean interest rates not being increased every meeting, but added that the Fed committee has yet to hammer out any final plan. Most of South America also signals at a slow down on growth.
The Fed’s deliberations are taking place as the labour market improves and inflation remains stagnant. In contrast, palladium, used more heavily in petrol auto catalysts, was poised for its biggest weekly rise since December 2011, up nine per cent, on expectations that consumers could move away from diesel towards petrol vehicles.
Speculators have cut bullish bets on the U.S. dollar in the week ended September 22 to their lowest since late July previous year, according to data from the Commodity Futures Trading Commission released on Friday. For the Fed to hike rates now that it has waited for so long everything will have to be right. He said that this has built up over the last few years, leading to a “better balanced” economy with a stronger financial system. The data will have huge implications for the Fed’s decision whether or not to raise interest rates later this year. “Yellen’s statement that they’re going to probably raise rates by year-end implies a stronger dollar, which isn’t favorable for gold“. He said that his estimate of the unemployment rate consistent with a healthy economy is 5 percent, just slightly below the 5.1 percent unemployment rate for the country in August.
Earlier, San Francisco Federal Reserve Bank President John Williams said Monday in the USA he sees monetary policy in the US beginning to normalize this year.