Federal Reserve Bank of New York President William Dudley said Wednesday that prospects of a U.S. central-bank rate rise next month have dimmed amid rising concerns about events happening outside of America’s borders.
Mr. Dudley said boosting short-term rates off their current near zero levels at the Federal Open Market Committee’s mid-September meeting now looks “less compelling” in light of the market’s volatility and worrisome news out of China.
The U.S. economy appears on track to grow at a “moderate” pace, he said, but it is also possible overseas trouble could affect this trajectory, Mr. Dudley said. He said the Fed will look at a wide range of data when deciding on rates.
“I really do hope we can raise interest rates this year,” Mr. Dudley said. But he added, “Let’s see the data unfold before we make any statements when that might occur.”
Mr. Dudley spoke in response to reporters’ questions following a briefing at the New York Fed on regional economic conditions. The vice chair of the interest-rate-setting FOMC didn’t comment on the national economy or monetary policy in remarks prepared for the briefing.
Mr. Dudley spoke at a time of highly unsettled markets, rising uncertainty about the economic outlook, and mounting questions about the Fed’s ability to raise short-term interest rates this year. Fed officials have long looked to the current year as the time they would be able to boost short-term rates off the near-zero levels they have rested at since the end of 2008. Over recent weeks and months, some officials had indicated it was likely that rate rise would take place at the Fed’s upcoming mid-September policy meeting.
But overseas events, most notably in China’s giant economy, have rattled the outlook. A slowdown there and heavy stock-market losses have reverberated across the globe and called into question whether the Fed will be able to raise rates. Former Treasury Secretary Lawrence Summers said in a recent opinion article that boosting borrowing costs would be a wrong move. J.P. Morgan economist Michael Feroli told clients in a note Tuesday that odds of a rate rise in September are now less than even.
Mr. Dudley is an influential voice on the FOMC and is a close ally of Fed Chairwoman Janet Yellen. He has been an infrequent voice on monetary-policy issues over the summer, however. His comments Wednesday are even more notable for coming just ahead of the Kansas City Fed’s annual research conference in Jackson Hole, Wyo., where questions of what’s next for the Fed will be at the forefront of the debate.