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Fed's Dudley: Equity Rout Hasn't Yet Changed His Outlook

Fed's Dudley: Equity Rout Hasn't Yet Changed His Outlook
(Dollar Photo Club)
 

Thursday, 08 February 2018 01:41 PM

New York Federal Reserve President William Dudley said on Thursday that as long as the U.S. economy continues to grow above trend this year, he would be in favor of another interest rate rise at the U.S. central bank's upcoming meeting in March.

"As long as I am comfortable the economy continues to grow at an above-trend pace at a time that I think monetary policy is accommodative and financial conditions are easy, I'm probably going to be supportive of removing monetary policy accommodation," Dudley said in an interview with Bloomberg Television when asked what it would take for him to vote for another rate hike in March.

Dudley also wasn't daunted by the recent stock volatility.

The Dow Jones Industrial Average sank another 500 points on Thursday as a renewed rise in U.S. bond yields and fears of higher inflation unnerve investors still piecing over a historic drop earlier this week.

The 10-year U.S. Treasury yield rose to a high of 2.884 percent in morning trade, nearing Monday’s four-year peak of 2.885 percent after the Bank of England said interest rates probably need to rise sooner than previously expected.

That added to expectations that the world’s major central banks are now firmly on course to wind down the emergency stimulus they have pumped through the financial system since 2009, driving an almost decade-long stock market rally.

"So far I'd say this is small potatoes," the central bank official told Bloomberg News.

"Clearly the market is adjusting to the fact that the global economy is growing quite quickly and as a consequence of that, monetary authorities around the world are either starting to remove accommodation or thinking about starting to remove accommodation, and that's a little different than the environment we were in the prior seven or eight years," he said.

The market’s main gauge of volatility, the CBOE Volatility Index, fell to 29.82 on Thursday, more than twice what it was a week ago but down off a two-and-a-half year high above 50 points hit on Tuesday.

Investors are still weighing whether the sharp swings this week are the start of a deeper correction or just a temporary bump in the nine-year bull market, spurred by concerns over rising interest rates and bond yields.

“Things haven’t quietened down. Things are all over the place. The market is trying to find a bottom to this madness,” said Jason Ware, chief investment officer at Albion Financial Group.

“Now we are having acute attention on what happens in the bond markets, so when yields move up there is an unsettling feeling in the equity market.”

© 2018 Thomson/Reuters. All rights reserved.

   
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New York Federal Reserve President William Dudley said on Thursday that as long as the U.S. economy continues to grow above trend this year, he would be in favor of another interest rate rise at the U.S. central bank's upcoming meeting in March.
fed, dudley, plunge, economy, rates
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2018-41-08
Thursday, 08 February 2018 01:41 PM
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