Fed's Dudley: Strong case to to keep gradually raising rates

Author: Greg Michalowski | Category: Central Banks

Speaks on tax cuts and implications

  • US tax cuts to get short-term boost to economy but pose serious long-term risks
  • tax cuts will come at a cost, pose challenges for Fed
  • says tax cuts make him considerably more cautious about longer-term economic Outlook
  • US fiscal path now unsustainable, sees risk to US credit worthiness
  • significant portion of tax cuts will be saved not spent
  • expects above trend GDP growth, rising inflation in 2018
  • raises expected 2018 GDP growth forecast to 2.5%-2.75%, mostly due to tax stimulus
  • expects inflation hitting 2% target in medium-term: unemployment down below 4% this year
  • small transitory inflation overshoot not a problem

His comments are a bit new from Fed officials.  "Serious long term risks" catches my eye. Also although he sees a boost in growth from tax cuts, he also expects most to be saved, not spent. 

Dudley is a permanent voting member of the Fed (being the NY Fed president) but will be leaving the Fed in mid-2018.  His comments seem to suggest, he might be happy leaving the Fed given the challenges from the fiscal policy changes. 

The USDJPY -after bottoming earlier at the the 111.03 level (target 111.00-02) - is trading up at at 111.17 currently (see early post outlining the level as a downside target today). The comments have had a limited impact, but technically, the 111.00-02 is more important on the bounce.  
By continuing to browse our site you agree to our use of cookies, revised Privacy Notice and Terms of Service. More information about cookies