Global headwinds that have partly prevented the U.S. central bank from raising rates again may have dissipated, St. Louis Federal Reserve President James Bullard said on Thursday.
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"Those factors appear to be waning during the first half of 2016," Bullard said in prepared remarks at an event in Santa Barbara, California.
He added that financial stress has fallen according to recent readings and that the effects of a stronger dollar also appeared to have waned.
Fed policymakers in March forecast two rate increases this year but have been cautious amid slowing global growth and mixed U.S. economic data.
Weak U.S. first-quarter gross domestic product growth appears at odds with months of strong job gains.
Bullard said the U.S. labor market is "at or possibly well beyond reasonable conceptions of full employment" and noted a recent upward trend in inflation.
“Still, combining actual data from the second half of 2015, the first quarter of 2016, and tracking estimates for the current quarter, the suggestion is that the U.S. is growing below a trend pace of 2 percent,” he said.
Bullard said it was difficult to conclude whether predictions by the Fed or by the markets for the central bank's longer-run path of rate rises was more accurate.
Traders currently see the Fed next raising rates in December, according to an analysis of fed fund futures by the CME Group.
The next major indicator comes on Friday when the Labor Department issues its monthly employment report for April.
The Fed hiked rates for the first time in a decade from near zero in December and next meets on June 14-15.
(Reporting by Lindsay Dunsmuir and Howard Schneider in Washington; Editing by Andrea Ricci)