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Dudley says economic outlook little changed since Fed meeting

Friday, January 15, 2016 - 22:41

[NEW YORK] The US economy should continue to grow faster than its potential this year, supporting further interest-rate increases by the Federal Reserve, New York Fed President William C Dudley said.

"In terms of the economic outlook, the situation does not appear to have changed much" since the Fed's Dec. 15-16 meeting, Dudley said, in remarks prepared for a speech Friday in Somerset, New Jersey. He added that he continues "to expect that the economy will expand at a pace slightly above its long-term trend in 2016," and said future rate increases would depend on incoming economic data.

In December, Fed Chair Janet Yellen and her colleagues on the Federal Open Market Committee elected to raise the benchmark federal funds rate from near zero, where it had been held since December 2008. The median committee member projected the central bank would raise interest rates four times in 2016, according to materials released following the meeting.

Dudley downplayed recent weakness in measures of inflation expectations from consumer surveys. While the "most concerning" risk to the price outlook is the possibility that "inflation expectations become unanchored to the downside," he said continued above-trend economic growth should push them higher.

"That said, should the economy unexpectedly weaken, then this fall in inflation expectations would become more concerning," Dudley said.

Global financial markets have been roiled since the Fed raised rates, in part due to a depreciation in China's currency and turbulence in that country's stock market.

Still, the US bond market's "response to lift-off has been very mild," Dudley said. "Generally so far, so good."

BLOOMBERG

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