Market reaction in August has raised some questions about the a slowing global economy for the second-half of the year, a widely-watched Fed official said on Friday.
“I think the key question is, are we going to get sufficient growth in the economy, put downward pressure on the unemployment rate, get an acceleration in wages,” said William Dudley, president of Federal Reserve Bank of New York. “If we get that, I’ll be reasonably confident inflation returning to 2 percent.”
Dudley, a voting member of the Fed and vice-chairman of the Federal Open Market Committee, was speaking in an exclusive interview with CNBC.
He said that weaker global developments, particularly in China, could potentially slow the U.S. economy.
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In late September, Dudley said that the Fed remains on track for a likely rate hike this year and could reach its inflation target next year, faster than many other policymakers anticipate. He had said that the first hike could come as soon as October on the heels of an improving economy.
The U.S. central bank delayed a rate hike at its September meeting in the face of uncertainty about the global economy, a market selloff in the U.S. and concern that inflation might fall further away from the Fed’s two percent target.
The minutes from the Sept. 16-17 meeting released on Thursday showed the Federal Reserve’s policymaking committee was unsettled by signs of a global economic slowdown but didn’t think this had “materially altered” the outlook for the economy.
The Fed thought the economy was close to warranting an interest rate hike in September but policymakers decided it was prudent to wait for evidence a global economic slowdown was not knocking America off course.
—Reuters contributed to this report.