One of the Federal Reserve’s most dovish officials on Friday said that September may turn out to be the right time to raise interest rates if the US economy continues to improve, and he set a relatively high hurdle for delaying the move until next year.
Boston Fed president Eric Rosengren said in an interview that while wild cards remain — including the recent drop in oil prices, China’s economic slowdown, and the ongoing Greek debt crisis — the US central bank could move to tighten policy at any upcoming meeting.
“If we do continue to get improvement in labour markets, if we do become reasonably confident that we’re moving back to 2% inflation, it may be appropriate as early as September,” Rosengren said of raising rates from near zero. “I don’t think we have seen that evidence yet but we still have a couple months of data to see whether it’s more strongly confirmed.”
Rosengren has long advocated for more monetary accommodation than most of his colleagues at the central bank, which has kept interest rates at rock bottom to boost the recovery. With wages showing early signs of a pick-up and US unemployment down to 5.3%, he set a high bar for delaying a hike.
Only if labour markets unexpectedly weaken, if core inflation starts to drop off, or if the wage gains dissipated, “those would be the things that would make me want to pause and wait and see whether there is further evidence,” he said.