The Federal Reserve’s forecast of two more interest rate hikes this year seems reasonable, said New York Fed President William Dudley on Friday.
Dudley said predicting the future path of interest rates “isn’t very relevant.” He noted the Fed initially thought it would hike rates four times in 2016 but managed only one.
“A couple more hikes this year seems reasonable. If the economy is a little bit stronger than we expect, we could do a little more, and if it’s weaker than we expect, we could do a little less,” Dudley said in an interview with Bloomberg TV.
The New York Fed president, who is always a voter on the U.S. central bank’s interest-rate committee, and is seen as a close ally of Fed Chief Janet Yellen, said he saw no “urgency” to raise rates. He noted the economy is only growing “a little above trend,” seen as somewhere around 2% annual rate.
Dudley downplayed the latest reading on inflation, which showed headline inflation, as measured by the Fed’s target personal consumption expenditure price index, accelerated in February to a 2.1% annual rate, slightly above the central bank’s official target.
Read: Inflation reaches Fed target for first time in nearly five years
“Inflation is still a little bit below our target, if you look at the underlying pace of inflation,” he said, pointing out that PCE inflation, adjusted for food and energy prices, remained at 1.8% in February.
“That tells you there is not this huge rush that we have to tighten monetary policy quickly. The economy is not overheating,” he said.
This fits with Dudley’s speech on Thursday where he quipped the Fed didn’t want to take away the punch bowl from the party but only wanted to add more fruit juice to the concoction.
“It makes sense to very gradually take back accommodation to get monetary policy closer to neutral,” he said.
Dallas Fed President Rob Kaplan also emphasized this patient approach to raising rates in an interview with MarketWatch on Thursday.
Read: Fed’s Kaplan sees risk Washington could derail the expansion
The consensus among economists is that neutral interest rate is somewhere between 2% and 3%. Earlier this month, the Fed raised its range for the target federal funds rate to a range between 0.75% and 1%.