Fed's Dudley Still Sees Rate Rise Before Year-End

Federal Reserve Bank of New York President William Dudley said late Wednesday that he expects the central bank will be able to raise interest rates before year-end, but the job this year would be more predictable when it did so last December.

In a question-and-answer session following a speech at New York City's Lotos Club in upper Manhattan, Mr. Dudley said the Fed is closing in on its monetary policy objectives that should allow for a follow-up interest-rate increase this year.

"I do expect to see an interest rate rise later this year," he said, telling the audience that market participants and the economy should be able to absorb such a move.

"If we raise the federal-funds rate a quarter of a [percentage] point, that's not really that big of a deal," Mr. Dudley added. "This idea that it's this incredible fork in the road, I think people are exaggerating the significance."

Still, the central banker said he didn't see an urgency to tighten monetary policy aggressively, and the Fed will remain on a gradual path as it normalizes interest rates.

This year, if the Fed were to follow through on another rate increase as a follow up to its last one in December 2015, the circumstances would be different because last year, Mr. Dudley said the central bank wasn't sure whether it's mechanisms would be effective in getting benchmark short-term rates to move.

"A year ago, we weren't sure whether when the Fed wanted to raise [rates]�that the tool kit was necessarily going to work," he said. Now that the Fed has "demonstrated we do have control," he said this year would be much less of an issue.

Write to Katy Burne at katy.burne@wsj.com