Bill Dudley says Fed can gently hike rates

Speaking to a business council gathering, Bill Dudley echoed Janet Yellen’s message of last month and said that Fed can gently hike rates. A December rate hike is imminent?

12 October, AtoZForex Ahead the FOMC meeting minutes released, Fed New York President Bill Dudley spoke in the question-and-answer business council gathering. The Fed speaker revealed that the US inflation projections are “well-anchored, along with the “slack” in the US labor markets are the main reasons why the Fed can gently hike rates.

The US dollar index (DXY) extended its gains slightly, during the comments of Bill Dudley. In regards to the US Inflation, he stated that it might just below target, but the US does not have the same issue like Japan or Europe. Where the economies struggle with deflation.

US Job market plays a vital role

Bill Dudley expects that the US economic expansion could last at least five more years. Reiterating the message of Fed Chair Janet Yellen of last month, Dudley said today that:

“We’re at a point where the economic expansion has plenty of room to run. The best thing that could happen for the U.S. economy (is) to grow at a moderate rate for the next five to 10 years and the unemployment rate to stay around 5 percent or lower.”

The US job market is the key reason, why the Fed has relatively been patient in terms of hiking rates, according to Bill Dudley. He mentioned that there is more slack or underemployed than indicated by the US unemployment rate. The recent nonfarm payrolls showed an increase of 156,000 in September, while the unemployment rate rose by 5 percent, suggesting that more people began to look for work.

What to expect for the November Fed meeting?

The next Fed meeting is scheduled for the 1st and 2nd of November, a few days before the US presidential election. Analysts are not expecting a Fed rate hike in November, but believe that a December rate hike is more likely. Goldman Sachs has increased the odds for a December rate hike today to 75 percent.

Earlier this week, Fed Chicago President Evans supported this view and said that he would be more than “fine” with a Fed rate hike by the end of 2016. Next, all eyes are on the FOMC meeting minutes release, along with the speech of Fed Chair Janet Yellen this coming Friday.

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