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NY Fed President: mid-2015 rate rise is a ‘reasonable’ expectation

October 8, 2014, 11:31 AM UTC
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NEW YORK, NY - JULY 29: An United States flag flies over the entrance to the Federal Reserve Bank of New York, located at 33 Liberty Street, on July 29, 2011 in New York City. Bankers and economists were invited to meet with Treasury Department officials at the bank today to discuss the on-going debt-limit crisis and how it could effect markets. (Photo by Andrew Burton/Getty Images)
Photo by Andrew Burton—Getty Images

A mid-2015 interest rate rise is a “reasonable” expectation, according to New York Federal Reserve President William Dudley.

“The consensus is that lift-off will take place around the middle of next year,” Dudley said in a speech in Troy, New York Tuesday. “That seems like a reasonable view to me.”

Policy makers have been carefully considering when to raise rates as economic signals remain muted. Inflation remains well below the Fed’s 2% target as weak foreign demand for U.S. goods is exacerbated by a strengthening dollar and domestic energy production surges, reported Bloomberg.

On top of that, the improvement in the labor market is still not a strong as Fed officials hoped it’d be by now. The unemployment rate unexpectedly fell to 5.9% last month and the economy added more jobs than expected, though there’s still a “significant underutilization of labor market resources,” said Dudley.

“It still is premature to begin to raise rates,” he said. “The labor market still has too much slack and the inflation rate is too low.”

The Federal Open Markets Committee said it would continue to keep rates low for “considerable” time, though didn’t give any insight into how long that would be. Its quantitative easing program, which was used to pump cash into the economy following the Great Recession, will end this month.