The U.S. economy is getting stronger. That’s one reason why William Dudley, president of the New York Federal Reserve, says policymakers can raise rates in the near future.
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“We are edging closer towards the point in time when it will be appropriate to raise rates further,” said Dudley during an exclusive interview with Peter Barnes on the FOX Business Network. When asked whether a September rate hike was on the table Dudley said, “Yeah, I think it is possible”.
Dudley highlighted the improving trends he is seeing in the economy including a “tightening” job market. U.S. employers added 255,000 jobs in July, a major improvement following May’s data, which showed just 11,000 new jobs were created. He also noted inflation is moving closer to where the Fed wants it to be: [We] “seem to be on trajectory for 2% inflation.”
In recent commentary, Fed Chair Janet Yellen repeatedly noted her concern over inflation running below the Fed’s preferred level. Little to no inflation leaves U.S. companies with little pricing power, among other things.
These factors, in Dudley’s view, will drive economic growth in the coming months. The “economy in general will be better in the 2H,” he said.
Dudley’s comments coincide with U.S. stocks climbing to fresh records. The S&P 500, the broadest measure of U.S. equities, has advanced 4% this year, along with record low U.S. Treasuries prices. The yield on the 10-Year, which trades inversely to bond prices, has drifted to 1.57%.
When asked if he was concerned about financial bubbles brewing he said, “I don’t see anything now that is particularly disturbing, I would argue the one area which looks a little bit stretched to me is the bond market.”
Dudley noted the massive quantitative easing efforts coming from the Bank of Japan, the European Central Bank and the Bank of England as factors driving up the price of U.S. bonds.