Federal Reserve officials have not reached a decision on raising interest rates next month and are still looking at incoming data, the central bank’s vice chairman said Friday.
“We haven’t made a decision yet, and I don’t think we should make a decision” until the monetary policy committee’s next meeting on Sept. 16 and 17, Stanley Fischer told CNBC.
Fischer’s comments indicated that recent turmoil in the stock markets have not necessarily dissuaded the Fed from moving to tighten monetary policy by raising its short-term interest rate target for the first time in nine years.
“There was a pretty strong case” for raising rates before the recent volatility in markets, Fischer said, citing rising employment and growing economic output. “This economy has come back to something close to full employment.”
Recent gyrations in stocks could affect the Fed’s decision because they could provide a signal about what’s happening in the real economy, he noted.
China’s currency devaluation earlier this month kicked off a market reaction that has rattled expectations about the course of monetary policy. As volatility settles down, Fischer said, Fed officials will keep watching economic data right up to the moment of the September meeting to make a decision.
The biggest piece of economic data before then will be the monthly jobs report released next week.
That and other indicators will be closely watched by the Fed and investors, because there are good arguments on both sides of the debate about whether to raise rates, Fischer suggested. The Fed must move even in the face of uncertainty, he added, because its rate decisions affect business and household decisions with a long lag.
“When the case is overwhelming — if you wait that long it will be too long,” he said.
Fischer appeared on CNBC from the Federal Reserve Bank of Kansas City’s monetary policy conference in Jackson Hole, Wyo.
With Fed Chairwoman Janet Yellen skipping the meeting, the top Fed official there is Fischer, who previously served as governor of the Bank of Israel. His words are scrutinized by investors for hints about the Fed’s plans for rates, which affect all other interest rates throughout the economy.
