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It’s premature to rule out rate increase, Fed president says
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President of Federal Reserve Bank of New York William C. Dudley gives his remarks at the Executives’ Meeting of Asia Pacific Central Banks (EMEAP) in Bali on August 1. (Courtesy of Bank Indonesia/-)
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ederal Reserve Bank of New York President William Dudley has warned that traders who had been ruling out an interest-rate increase later this year were becoming over-confident, despite the fact that Fed officials have left its short-term rates unchanged.
In his remarks at a Bali seminar, held by Bank Indonesia and The Fed, Dudley said all central bankers must be a bit more careful about the risk of tightening monetary policy in a manner that would prove to be premature, compared to the risk of being a little late.
“To my eye, market expectations derived from futures prices, which price in about one 25 basis point rate hike through the end of 2017, appear to be too complacent […] I think it is premature to rule out further monetary policy tightening this year,” he said in his remark in the Executives’ Meeting of Asia Pacific Central Banks (EMEAP) on Monday.
In recent months, the Fed has signaled that potential interest rate increases are possible this year, possibly as early as September. However, not all traders are convinced the central bank will act.
According to Samuel Sekuritas economist Rangga Cipta, the markets have had enough with the Fed’s uncertain plan for a benchmark interest rate hike, and have chosen to be pay more heed to China’s economic data.
“I, personally, also prefer to anticipate China’s updates rather than the US interest rate, regarding the fact that Indonesia and the ASEAN region are heavily related to China. A slowdown in the Chinese economy will have a double impact both in trade and market sentiment,” he said.
