The influential head of the New York Federal Reserve said on Monday that he is happy so far with the central bank’s rate rise cycle and that he expects wage growth to pick up further as the labour market tightens.
Bill Dudley said that the Fed’s four rate increases since the end of the financial crisis have not tightened financial conditions to a significant degree, according to US press reports of his remarks to a Business Roundtable Meeting in upstate New York.
Despite some jitters among investors, Mr Dudley reckons continued progress in the jobs market will push wages higher at a more rapid clip, something that would be expected to boost inflation closer to the Fed’s targets.
The policymaker added that stopping rate increases at this point could be dangerous for the economy. His stance echoes that of other senior central bankers who worry that with the jobless rate near levels seen as natural in a properly-functioning economy, there is a rising risk of inflation overshoots.
Treasury yields, which move inversely to prices, climbed on Mr Dudley’s remarks. The 10-year yield was recently up by 0.019 percentage point to 2.171 per cent. The dollar rose to session highs against the yen, recently up by 0.38 per cent on the day to Y111.30.