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Federal Reserve policymaker says clarity key to avoiding global disruptions
[NUSA DUA, Indonesia] As the Federal Reserve continues to raise interest rates in a strong US economy, transparency and open communications will be key to avoiding market disruptions and misunderstanding overseas, an influential Fed policymaker said on Wednesday.
Speaking in Bali, Indonesia, an emerging-market economy potentially vulnerable to capital outflows as the US central bank tightens policy, New York Fed President John Williams repeated that he expects continued gradual rate hikes.
The world's largest economy, he said, is enjoying a "very strong" labour market with no signs that inflation could rise too much.
Appreciating how Fed policy affects the global economy and then feeds back into the United States plays "an important role in my thinking about the economic outlook and the appropriate path for monetary policy," Mr Williams said in prepared remarks that largely mirrored a speech he gave late last month.
"A key lesson about policy-making in an interconnected world is that transparency and open lines of communication are critical to minimizing misunderstanding, market disruption, and volatility that can interfere with our common goals of having strong and stable economies," he said in remarks to be delivered at a conference co-hosted by Bank Indonesia and the New York Fed.
US unemployment has fallen to near a 49-year low of 3.7 per cent. In a nod to strong jobs and economic growth, the Fed raised its key policy rate another notch last month, to above 2 per cent.
The Fed's nearly three-year-old tightening cycle has in part prompted a global shift in capital from emerging markets, leading this year to sharp and painful currency devaluations in Turkey and Argentina, in particular.