New York Federal Reserve Bank President William Dudley said Friday that financial markets are “reasonable” in anticipating a rise in the Federal Funds Rate will not occur before mid-2015.
“It’s a very reasonable expectation,” Dudley, answering audience questions following a speech at Brooklyn College, said of market signals that the first official interest rate tightening in years will be “somewhere around the middle of 2015.”
In the meanwhile, however, there remains “substantial slack in the U.S. labor market,” Dudley said, and the unemployment rate is “not providing a lot of information.”
Indeed, the unemployment rate, which ticked higher in February to 6.7% from 6.6%, has arguably fallen further than expected from its recession peak of 10.0%, but not for the right reasons. Instead, the jobless rate has pressed lower mostly because labor force participation has declined as the frustrated unemployed no longer look for jobs, said Dudley, a voter this year on the Fed’s policymaking Federal Open Market Committee.
“It’s very important not to overemphasize the unemployment rate” in assessing labor market conditions, Dudley said, echoing his prepared remarks.
One way the Fed can help the long-term unemployed get back to work, he reiterated, is to have “a very accommodative monetary policy, to get the economy to grow as fast as possible.”
On other matters, Dudley noted that credit access for small businesses is finally improving, but credit for start-up enterprises is “still very difficult, because you don’t have the track record” to show to banks.
He also said he’d like to see the federal minimum wage indexed to the median wage.
“There’s a better regime than what we have in place today,” he said.
Turning to the brewing conflict between Russia and Ukraine, the New York Fed chief said, “We’re trying to assess what it means,” and added, “It’s still very early days.”
He and his colleagues are monitoring the situation “on a real-time basis,” Dudley said.