The case for tightening monetary policy is “quite strong,” a top Federal Reserve official said Friday, in some of the first remarks from the Fed’s leadership following the market volatility generated by Tuesday’s presidential election.
Addressing a Chilean conference remotely, Fed Vice Chairman Stanley Fischer laid out an optimistic view of the U.S. economy and jobs, one strong enough for the Fed to begin lifting interest rates and raising the cost of credit throughout the economy.
The central bank “appears reasonably close to achieving both the inflation and employment components of its mandate,” Fischer told the audience.
At 4.9 percent in October, the unemployment rate is just one-tenth above the rate that Fed officials see as consistent with a fully healthy economy.
And inflation has risen by about a percentage point over the past year to 1.2 percent, in the measure preferred by the Fed, closer to the 2 percent target it has set. Other indicators of inflation suggest that the underlying trend is for inflation to keep rising, after running below the target since 2012.
Speaking to the group of foreign central bankers, Fischer said he was “reasonably optimistic” that Fed tightening would be “manageable” for other countries. That’s a concern because in the past when the Fed has raised rates, it has hurt emerging market economies that have large amounts of dollar-denominated debts. Emerging markets are better-positioned now, Fischer said, and the Fed will make it easier for them by raising rates only slowly.
