There’s a more than 50-50 chance the Federal Reserve will raise interest rates in September, St Louis Fed President James Bullard said.
“The economy is much closer to normal today than it’s been in quite a while, certainly over the last five years,” Bullard said Monday in an interview on Fox Business Network. “The main problem is we are in emergency settings for monetary policy.”
Bullard, who is scheduled to be a voting member of the policy-setting Federal Open Market Committee in 2016, had previously argued the Fed should start raising rates sooner rather than later and last year was favouring a first move earlier in 2015.
Policy makers are edging toward raising rates for the first time since 2006 following solid gains in the labor market. Fed Chair Janet Yellen last week told lawmakers that waiting too long to raise borrowing costs holds risks for the US economy, along with tightening too quickly.
The nation’s jobless rate was 5.3 per cent in June, down from 6.1 per cent a year earlier.
“Unemployment will probably come down below 5 per cent. We’ve got a lot of reaching for yield in the economy,” Bullard said.
“So I think it would be prudent to move off zero and then take it meeting-by-meeting from there.”
Bullard said that while the Fed is trying to be data-dependent in deciding when to tighten, interest rates will probably rise if the economy stays on track for 3 per cent growth in the second half.
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