WASHINGTON — The continuing turmoil in global financial markets has reduced the chances that the Federal Reserve will raise its benchmark interest rate in September, a senior Fed policy maker said Wednesday.
In response to a question at a news conference after delivering a speech in New York, William C. Dudley, influential president of the Federal Reserve Bank of New York, said the case for a September rise had become “less compelling.”
“From my perspective, at this moment, the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago,” Dudley said, referring to the next scheduled meeting of the Federal Open Market Committee, which sets monetary policy.
But Dudley suggested that September remained a possibility if markets regain their equilibrium. And if the Fed decides to wait, he said, he would still hope to raise rates later in the year.
“Normalization could become more compelling by the time of the meeting as we get additional information on how the US economy is performing and more information on international and financial market developments, all of which are important in shaping the US economic outlook,” Dudley said.
Investors already are betting heavily that the Fed will not move to raise rates when policy makers convene in Washington in mid-September. Dudley’s remarks were the first public indication that recent events, including the decline of equity prices, are weighing on the Fed’s plans.
The remarks were particularly striking because Dudley has said previously that he does not want the Fed to surprise the markets. His remarks on Wednesday make it harder for the Fed to raise rates in September without doing so.