September in play: Fed deputy

US Federal Reserve vice chairman Stanley Fischer said it’s possible interest rates will increase next month.

Federal Reserve Chair Janet Yellen, centre, with vice chairman Stanley Fischer, right, and New York Fed boss Bill Dudley. AP Photo/Brennan Linsley.

The Federal Reserve’s second-in-command said Friday it’s possible the US central bank will raise rates next month, speaking in an interview with CNBC that also defended officials’ lack of firm guidance about the rate outlook.

When it comes to the question of whether or not the Fed will raise rates at its meeting next month and yet again before the end of the year, Vice Chairman Stanley Fischer said a speech by Chair Janet Yellen earlier Friday “was consistent with answering yes to both of your questions.” But Mr Fischer added “these are things we won’t know until we see the data.”

He noted the central bank is not under direct pressure to act, saying, “I don’t think the Fed is behind the curve.”

Mr Fischer was interviewed on the sidelines of the Kansas City Fed’s annual research conference in Jackson Hole, Wyoming. Dr Yellen, in her hotly anticipated speech, told attendees at the elite event that “in light of the continued solid performance of the labour market and our outlook for economic activity and inflation, I believe the case for an increase in the federal-funds rate has strengthened in recent months.”

Other Fed officials speaking Friday in TV interviews also offered support for rate rises although, like Dr Yellen, they did not offer timing for action. The Fed next meets on Sept. 20 and 21 in a meeting some think could see an interest-rate increase.

While Mr Fischer said indications are the Fed will deliver one and as much as two increases to the current 0.25 per cent to 0.50 per cent overnight target-rate range, he said there’s only so much the Fed can say in advance of a decision when it’s letting unpredictable data drive policy choices.

“People get upset at us saying we’re data-driven. I don’t know what the alternative is. Toss a coin?” Mr Fischer said.

The veteran central banker was upbeat about the economy and said inflation was experiencing a welcome rise with a jobless rate being near full employment.

“I think the evidence is the economy has strengthened” and, while recent growth data has been weak, that sort of data is backward-looking, Mr Fischer said. When making the call on a rate rise, he said, “we want to be looking ahead.”

Mr Fischer also said the coming presidential election will only matter to Fed policy to the extent it influences the economy. The policy maker also said he sees no signs of major imbalances in financial markets.

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