The recent wild market swings have weakened the case for the Federal Reserve to raise interest rates and begin tightening monetary policy, a top official said Wednesday morning.
“The decision to begin the normalization process at the September [monetary policy] meeting seems less compelling to me than it was a few weeks ago,” said Federal Reserve Bank of New York President William Dudley at a press conference in New York City.
“But normalization could become more compelling by the time of the meeting,” Dudley hedged.
Recent high volatility in global markets stemming from turbulence in China has raised the possibility that the Fed may slow its move to raise interest rates for the first time in nine years.
Previously, economists had expected that the Fed would raise rates at its September meeting, but now investors do not believe that such a decision is likely.
Dudley’s comments indicated that Fed officials will take the market turmoil into consideration, despite the overall improvement in economic output and jobs this year.
As president of the New York Fed, which carries out the Federal Reserve System’s monetary policy decisions, Dudley is the vice chairman of the monetary policy committee and a permanent voting member.
He added Wednesday that he still hopes the Fed would raise rates sometime in 2015, cautioning, “Let’s see how the data unfold before we make statements about when that might occur.”
