BINGHAMTON, N.Y. The Federal Reserve can be patient on raising interest rates due to low inflation and uncertainties over U.S. economic prospects, including Britain's vote to leave the European Union, an influential U.S. central banker said on Tuesday.
New York Fed President William Dudley, meeting with business and community leaders in Binghamton, New York, said that the U.S. economy is doing "ok" on average but that it was too soon to tell the effects of last month's so-called Brexit referendum.
A close ally of Fed Chair Janet Yellen, Dudley did not say when he expected the central bank to raise rates after having initially tightened monetary policy in December. But he cautioned there were reasons to wait and see.
"With uncertainties about the outlook and inflation being lower than desired, it allows us to be a little more patient," Dudley, a permanent voter on Fed policy, said in the heart of this former manufacturing city.
"If you strip out the energy sector, inflation is still a little below what we would like... so that allows us to be patient in terms of letting the economy run with accommodative monetary policy in place," he said. "If inflation were higher ... we could probably be a little more aggressive in terms of monetary policy."
Britons voted on June 23 to leave the EU, a shock decision that sent financial markets reeling and the dollar higher. Now, economists are not expecting the Fed to raise rates again until December or even next year.
"One of the biggest" clouds on the horizon for the U.S. economy is Britain's vote, even though it is "still early days" to understand the consequences, Dudley said, echoing recent comments of colleagues at the Fed.
"If there are broad contagions in financial markets, and if it leads to greater questions about the stability of the European Union, then it would have more severe consequences," he said.
(Reporting by Jonathan Spicer; Editing by Diane Craft)
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First Published On : Jul 6, 2016 02:15 IST