Fed Dudley: Odds of US June hike are much higher

20 May, AtoZForex, London – President of the Federal Reserve Bank of New York and vice chairman of the central bank’s policy-setting Open Market Committee William Dudley said Thursday that the odds of a June US interest rate hike are “definitely much higher” than few days ago.

Odds of June hike are much higher

“A few days ago, I thought the probability of a June tightening was a few percentage points,” said William Dudley answering reporters’ questions.

“If the economy evolves as I expect it to,” he said, then it is “reasonable to expect a tightening in the summer, the June-July timetable.”

April FOMC meeting minutes released Wednesday prompted financial markets to price in a higher chance that the Fed would make its next policy move sooner rather than later. The Committee made it clear that a June interest rate hike is on the table if the economy performs as expected. According to Mr. Dudley, the second quarter is shaping up better than the first quarter.

The Fed official noted that recent data hint at “a little bit of an uptick” in wage growth, a generally improving job participation rate and higher retail sales. He also said that some first-quarter “concerns have subsided.” Crude Oil prices have increased and there is less market anxiety about China’s foreign exchange policy.

“I’m becoming more confident that inflation’s going to move back to our 2% objective,” Dudley added. He said that the closely watched core PCE deflator has been “broadly stable.”

However, a potentially important distinction in the April FOMC minutes was that “most participants,” that were often mentioned, including non-voters. The actual voters, merely said that they were keeping “options open” and wanted to “maintain flexibility.”

Nonetheless, Mr. Dudley reassured that there is “no huge gap” in views among the FOMC members, presumably referring to both voters and non-voters.

The New York Fed president noted that there was a pretty strong sense among FOMC members that the market was not pricing in sufficient probability of a June hike. “I’m actually quite pleased to see this probability has moved up,” Mr. Dudley said.

Also see: April FOMC minutes: Brexit concerns

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