Fed’s Dudley Says Rate Hike Pace Will Be Shallow

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.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza