A top Federal Reserve official said Monday that the economy is strong enough for the central bank to tighten the money supply further, but only if such moves are “gradual and cautious.”
Speaking Monday in New York City, Federal Reserve Bank of New York President William Dudley pronounced that the Fed is on track to meet both the goals mandated by Congress.
The jobs market is strong, he said, and the Fed is closing in on its goal of 2 percent inflation, which it has fallen short of for nearly four years.
“I am confident that inflation will return to our 2 percent objective over the next few years,” Dudley said in his speech.
Because he heads the New York regional Fed bank that carries out the Fed’s monetary policy, Dudley is the vice chairman of the Fed’s monetary policy committee and votes in all of its decisions.
His comments, a vote of confidence in the Fed’s December decision to raise its interest rate for the first time since the financial crisis, come just a week and a day before the committee is scheduled to meet in Washington. Fed members impose a media blackout on themselves the week before the meeting.
In recent weeks, comments from officials at the central bank have suggested that the majority of members are not prepared to raise rates at the April meeting, being concerned about possible fallout from slowing growth overseas in particular. Investors see the possibility of a rate increase as very unlikely.
Dudley’s comments indicate that he remains optimistic about the possibility of further monetary tightening, even if interest rate increases are few and far between, as indicated in his “gradual and cautious” comment.
Dudley, however, issued a vote of confidence in the European economy, one of the variables that Fed members have been concerned about.
