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.
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)