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NY Fed president says interest rate rise still on for 2015

By NexChange
Capital Markets

An interest rate rise is still, definitely maybe, coming this year, promises New York Fed president William Dudley.

"Every meeting's a live meeting," Dudley said during a Wall Street Journal-hosted breakfast Monday. "Let's see what the information is [in October]," he said.

But Dudley was reluctant to forecast when the rate rise will happen, or even what exactly the Fed is waiting for. "I don't think it's possible to say if 'X' happens then 'Y' will follow," he said, explaining that there are too many "X"s to take into consideration. As different economic issues come up, such as devaluation of the yuan or the strengthening of the dollar, the U.S. economic situation could change. "We want to assess [the uncertainty in emerging markets] not for itself but for how it effects the U.S. economy," said Dudley.

The Fed isn't "chickening out" on raising rates either, said a defensive Dudley. "If things come along...we should change what we're going to do," he said. "The world is not a certain place."

And everyone needs to take a chill pill, Dudley indicated. "I think there's an over emphasis on the first [interest rate] move." Once the first move happens, the focus will turn to the second, and then the third, he said. The markets shouldn't count on a "mechanical" approach to interest rates, such as a quarterly raise. The ideal approach to the economic policy is something between mechanical rules and discretionary policies, said Dudley. Rules, like the Taylor Rule, are "guidelines" that need the personal insight of economists before being implemented. And the Federal Reserve needs to communicate those choice carefully, to keep investors on board, he said.

"We care about financial stability because of how it can disrupt" the macro economy, said Dudley.

Basically, we're still waiting. And may be for a while.
Photo: Michael Daddino

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