Federal Reserve Bank of New York President William C. Dudley said the pace of interest-rate increases is likely to be “shallow” once the Fed starts to tighten, and recent weakness in the economy was largely the result of temporary conditions.
“It will be important to monitor developments to determine whether the softness in the March labor market report evident on Friday foreshadows a more substantial slowing in the labor market than I currently anticipate,” he said in remarks prepared for a speech Monday in Newark, New Jersey.
Dudley reinforced Chair Janet Yellen’s message that borrowing costs are likely to remain low after the Fed raises its benchmark rate above zero. His comments were the first from the inner core of the Fed’s leadership since a government report Friday showed payrolls expanded less than forecast in March.
The timing of the first rate increase since 2006 “will be data dependent and remains uncertain because the future evolution of the economy cannot be fully anticipated,” Dudley said. “I anticipate that the path will be relatively shallow” as “headwinds in the aftermath of the financial crisis are still in evidence.”
The Fed last month dropped an assurance that it will be “patient” in tightening, while also reducing its forecasts for the benchmark rate. Yellen said after the meeting that the change in guidance doesn’t mean the Fed will be “impatient” to start raising rates, a phrase Dudley repeated today.