Two Federal Reserve officials are making the case that the novel tools likely to be employed to push short-term interest rates higher don’t necessarily augur a permanent policy-making overhaul, shedding light on the debate going on within the central bank.
New York Fed chief William Dudley and San Francisco Fed chief John Williams said this week that the new tools—including so-called reverse repos and interest paid on excess reserves—will likely have a role to play in lifting short-term rates from near zero, where they have been since the heights of the financial crisis in 2008.
The discussions on the mechanics of an eventual increase in short-term rates didn’t address an explicit timetable. Mr. Dudley cautioned the Fed’s first rate increase likely lies well in the future and no one knows for sure when it will happen. Mr. Williams said Monday that he thinks it will likely come some time in the second half of next year.