NEW YORK (Reuters) - Waiting for inflation to pick up before quickly tightening monetary policy heightens the risk of an economic hard landing, New York Fed President William Dudley said on Thursday.
“I don’t favor waiting until I sort of see the whites in inflation’s eyes,” said Dudley, who has a permanent vote on the Fed’s policy-setting committee.
He said after progress made by the Fed in keeping inflation expectations near 2 percent the risk of waiting too long to tighten monetary policy could lead to those expectations becoming “unanchored to the upside.”
“I think risking that would be very dangerous.”
Dudley, speaking at an Economic Club of New York event in Manhattan, said the international economic outlook “absolutely should” be considered in terms of how it weighs on the U.S. economy.
He said China’s economy is “pretty opaque” when it comes to trying to figure what is happening on a real-time basis but recent economic data supports the idea that the Chinese economy is in transition away from investment and towards consumption.
“The fact that the transition is underway makes me feel more comfortable,” he said.
He earlier said in a prepared speech that the international outlook seemed less problematic than it did “just a few months ago.”
Reporting by Rodrigo Campos and Sam Forgione; Editing by Chizu Nomiyama