Former Federal Reserve Bank of New York President William Dudley said Tuesday he believes the Federal Reserve will target an outsized rate hike on Wednesday as it seeks to quickly ramp up monetary policy to keep pace with the rising to cope with inflation.
The Fed is likely to hike rates by three-quarters of a percentage point at the end of the Federal Open Market Committee meeting, William Dudley said at a Wall Street Journal CFO Network summit. Mr. Dudley, who was once chief economist at Goldman Sachs, ran the New York Fed from 2009 until his retirement in 2018.
Mr Dudley remains an influential voice on central bank issues and in recent comments has criticized the Fed for being too slow in responding to the surge in inflation, which has forced central bankers to quickly change interest rate outlooks. This week, markets have moved from expectations of a half a percentage point rise from the Federal Open Market Committee meeting to a larger move after hot consumer-level inflation data released on Friday.
“I get the impression that the Fed decided to do 75 basis points instead of 50 because the data we’ve had over the past week or so shows higher inflation and perhaps even more worrying news on inflation expectations,” Mr Dudley said.
When asked if an even more aggressive 1 percentage point increase would be a good idea, Mr Dudley said: “You can certainly make that argument because when you decide that the speed at which you get there is just as important as that level you’re going to get there, why not get there faster?” The current target rate for federal funds is now between 0.75% and 1%.
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