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Friday, March 31, 2017

Fed's Dudley: A couple more rate hikes seems reasonable

  • Not at the stage where there is a great urge to tighten policy
  • The US economy is not overheating
  • The neutral funds rate in 2 to 3% range. (the current rates is 0.75%-1.00% target range)
  • Sees discouraged workers returning to labor  force
  • Rising sentiment is not showing up yet  in the US data
  • In Q1 US GDP may be a bit weaker
  • fiscal policy has added to the US economies upside risk
  • He did not adjust his forecast  explicitly for fiscal policy
  • An increase in infrastructure spending  can boast  US productivity
  • Normalizing balance sheet is a substitute for rate hikes
  • Could see a roll off of balance sheet by the end of 2017
  • no big need to differentiate on MBS and Treasury 
  • System for controlling the Fed funds rate works well
Feds Dudley went on Bloomberg TV and reiterated thoughts and comments of the Feds current thinking.  More tightenings in 2017. Keep the 2-3% level in mind going forward. There are calls for 2 more tightenings in 2017 and 3-4 more in 2018. That would get the Fed Funds rate in the middle of the 2-3% "neutral rate" target. 

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