Several Fed officials say they are ready to raise rates

Several Federal Reserve officials suggested in separate remarks Thursday that they are ready to start raising the central bank’s benchmark interest rate in December. But they emphasized that they want to move slowly and cautiously because the economy remains unusually weak.

William C. Dudley, the president of the Federal Reserve Bank of New York, was the first to signal, in late August, that the Fed would not raise rates at its September meeting, and he said Thursday that his reasons for hesitation had receded.

He said he now sees a stronger case for the Federal Open Market Committee, the Fed’s policymaking body, to raise rates.

“I think it is quite possible that the conditions the committee has established to begin to normalize monetary policy could soon be satisfied,” Dudley told the Economic Club of New York. He said he viewed the risks of acting too soon and waiting too long as “nearly balanced.”

The Fed has held interest rates near zero since December 2008 to stimulate economic activity by encouraging risk-taking by investors and borrowing by businesses and consumers. Raising rates would begin to reduce that effect. Indeed, as investors anticipate liftoff, borrowing costs have already started to rise. The average rate on a prime mortgage loan reached 3.98 percent last week, according to Freddie Mac, the highest level since the summer, when investors last expected the Fed to act.

Two officials on opposite ends of the Fed’s internal debate indicated in separate speeches that they could accept the combination of a December liftoff followed by a slow pace of rate increases. But their speeches also highlighted emerging differences about pacing.

Janet Yellen, the Fed’s chairwoman, has suggested that the bank would like to raise rates about one percentage point over the next year, implying a level a little above 1 percent at the end of 2016.

Charles Evans, president of the Federal Reserve Bank of Chicago, who has said in previous speeches that he did not want to raise rates this year, said Thursday that he is no longer focused primarily on the timing of liftoff but instead on pressing for rates to rise slowly.

Dudley said the economy finally appeared ready for higher rates, but he also underscored that the Fed still views the decision to raise rates as a close call and that disappointing data still could change the Fed’s decision before it meets Dec. 15 and 16.

This story was originally published November 12, 2015 at 3:45 PM with the headline "Several Fed officials say they are ready to raise rates."