Fed's Dudley speaking with Jon Hilsenrath:
- Sees value in pushing unemployment below natural rate
- Economy is doing pretty well
- Expects the Fed to hike later this year
- It's not possible to say what would cause him to support a hike
- Cites financial conditions and global growth as factors for rates
- October FOMC meeting is a live meeting
- Monetary policy isn't as easy as people thing it is
- Equilibrium real interest rate now close to zero
- "If policy was truly accommodative, then why is growth so low?"
- If financial conditions tighten after first hike, we'll more slowly
- Don't expect mechanical approach to policy tightening
- Chinese growth a big issue for global economy
- The world is not a certain place, things change
- Don't see high financial stability risks at the moment
- We are confident on inflation expectations but not 100% sure
- Inflation likely to rise in medium term, downward pressure on inflation from strong dollar likely to abate
- Fed to be flexible on size of overnight reverse repos at liftoff
- 'Highly confident' that Fed can hold the floor on rates
- My opinion is that limits on overnight reverse repos shouldn't exist
The interview is live on WSJ's new central banking pro site.
Here he is giving the finger-point head wag. Strong move.
Dudley talking about rate hikes this year is hawkish. The Fed funds market is around 42% for a hike this year and Dudley isn't usually one to talk up the possibility. USD/JPY jumped to 120.26 from 120.05 on the headlines.
