The Federal Reserve will not just tighten policy based on how the U.S. economy is faring, but on how well financial markets respond to the eventual interest-rate hikes, an influential Fed official said on Monday.
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New York Fed President William Dudley said the U.S. central bank will unleash more aggressive rate rises if financial markets, which include short- and long-term rates, equities, and the dollar, are less responsive than desired.
"How much one pushes on the short-term interest rate lever depends, in part, on how financial market conditions respond to such adjustments," he said in a speech. "All else equal, less responsiveness implies larger interest rate adjustments and vice versa."
(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)