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Boston Fed president says December rate hike is ‘plausible’

Eric Rosengren, the Federal Reserve Bank of Boston president.Jonathan Wiggs/Globe staff/file 2015/Globe Staff

The election of Donald Trump as president may have taken many business leaders by surprise, but it apparently hasn’t changed the minds of the federal government’s central bankers about a likely interest rate increase in December.

With the economy nearing what is considered full employment, and inflation still low, Eric Rosengren, the Federal Reserve Bank of Boston president, on Tuesday restated his concerns that waiting too long to raise rates could disrupt the economic recovery.

Investors are pegging the probability of the Fed raising rates next month at 75 percent and Rosengren, during a speech before the Portland Regional Chamber of Commerce, suggested they may be on target.

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“Absent significant negative economic news over the next month, the market’s assessment of the likelihood of tightening in December seems plausible,” he was expected to say during his breakfast speech.

In September, Rosengren joined two other members of the Fed’s rate-setting committee in dissenting with the central bank’s decision to keep rates unchanged. He voted earlier this month to keep current rates, he said, only because he expects them to go up in December.

The Federal Reserve has kept a benchmark rate historically low since the 2008 financial crisis in an effort to jump-start the economy by spurring lending and hiring. The central bank raised rates for the first time last December by 0.25 percent, but shelved plans for several more incremental increases this year following mixed economic news.

Rosengren on Tuesday said he would like to see the Fed raise rates gradually to sustain the recovery. He added that waiting too long for unemployment to fall even further could risk overheating the economy, requiring more rapid rates hikes that could rock the ongoing recovery.

The December meeting will be Rosengren’s last opportunity for a while to have such an influential role in setting monetary policy. His one-year rotating term on the Federal Open Market Committee, the board that sets rates, is coming to an end.

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Deirdre Fernandes can be reached at deirdre.fernandes@globe.com. Follow her on Twitter @fernandesglobe.