US Federal Reserve builds case for rate hike

Washington/New York: US Federal Reserve officials lined up behind a likely December interest rate hike with one key central banker saying the risk of waiting too long was now roughly in balance with the risk of moving too soon to normalise rates after seven years near zero.

Other Fed policymakers argued that inflation should rebound, allowing the Fed to soon lift rates from near zero though probably proceed gradually after that.

In New York, William Dudley said: “I see the risks right now of moving too quickly versus moving too slowly as nearly balanced.”

His assessment of “nearly balanced” risks represents a subtle shift in the thinking of a Fed member who has been hesitant to commit to a rate hike, but now sees evidence accumulating in favour of one. For much of Janet Yellen’s tenure as Fed chair, policymakers at the core of the committee, and Ms Yellen herself, have said they would rather delay a rate hike and battle inflation than hike too soon and brake the recovery.

In Washington, Fed vice- chair Stanley Fischer said inflation should rebound next year to about 1.5 per cent, from 1.3 per cent now, as pressures related to the strong dollar and low energy prices fade.

Elsewhere, two regional Fed bank presidents who had already backed a rate hike repeated their calls for the Fed to move. St. Louis Fed president James Bullard and Richmond Fed president Jeffrey Lacker said they feel that rates would move slowly after the initial “liftoff.”