The Federal Reserve should be cautious on interest rate increases due to lingering risks to the U.S. economy, one of its most influential policymakers said on Monday, appearing to signal the chance of a hike by the end of the year was fading.
While New York Fed President William Dudley said it was “premature” to rule out a policy tightening in 2016, he added that negative shocks were more likely than positive ones due to the unknown fallout from Britain’s vote to leave the European Union and a strong dollar.
“All three of these reasons – evidence that U.S. monetary policy is currently only moderately accommodative, the fact that U.S. financial conditions have been influenced by economic and financial market developments abroad, and risk management considerations – argue, at the moment, for caution in raising U.S. short-term interest rates,” said Dudley, a close ally of Fed Chair Janet Yellen and a permanent voter on U.S. policy.
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Craig Erlam
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