Amid the rising speculations over when the US central bank will be making the possible rate hike this year, a top Federal Reserve official on Friday proposed that it’s safer to act ‘too late’ on raising interest rates than to do too early.
New York Fed President William Dudley, an influential figure in the Fed Reserve, endorsed a high-profile research paper arguing that, if given time, the US economy can recoil to the stronger rate of growth.
Four top American economists presented the research paper on Friday to an august gathering of influential central bankers in New York.
The economists argued the central bank would be judicious to maintain key rates at rock bottom for a period longer than planned while deciding over tightening the monetary policy more aggressively.
Dudley, who offered a critique of the research paper, cited the prevailing low inflation rate and cautioned against being too anxious to tighten the country’s monetary policy by raising the interest rates.
Addressing a large forum hosted by the Booth School of Business at the University of Chicago, Dudley said, “The risks of hiking rates a bit early are higher than the risks of lifting off a bit late. This argues for a more inertial approach to policy.”
Federal Reserve Bank is in the spotlight in the global context as it is considering when to hike rates after maintaining them at near zero level for over six years, and how to tighten policy further.