At a time when the world is watching the highly-anticipated interest rates hike in the United States, two top officials of the Federal Reserve Bank has said that they could still increase the key rates in June despite recently recorded weak economic data and the rising skepticism among the investors.
Fed Governor Jerome Powell and New York Fed President William Dudley revealed about the scenarios under which the US central bank could chose an earlier date than many expected now for raising the key rates.
Dudley, Federal Reserve’s policy committee’s permanent voting member, said, “I could imagine circumstances where a June rate hike could still be in play. If the economy’s strong, the unemployment rate is dropping, wages are rising, and the outlook is good, you could conceivably get to that point…The bar is probably a little bit higher for a June hike given recent data.”
Dudley is also a close ally of Federal Reserve Chairperson Janet Yellen.
Echoing similar sentiments, Powell said that he would wish to commence tightening policy even at the current low inflation levels. He also said that the Fed should proceed steadily from then in order to ensure continued economic recovery from the 2007-2009 recession.
“You cannot wait until you see the goal posts coming because monetary policy works with these long lags,” Powell said.
Powell further said that the US central bank could choose to move in June if the country’s economic data over the next two months give a clear indication that the economic recovery is on track.
“By the time of the June meeting we will have had a lot more incoming data on just about everything in the economy. June is a different world than today. I don’t think we need to be in a hurry, but you have to start well before you actually hit the goal,” the Fed official said.
The indication by the influential Fed officials amid the weak economic data has once again put the spotlight on the performance of the US economy over the next two months.
Disappointing US manufacturing activity, jobs growth and sales in retail sector over the winters had pushed the market expectations for an increase in interest rate to later in the year.
The month of June has long been seen as the earliest time when the Fed could tighten its monitory policy, after a long period of more than six years when it kept its rates near zero.