The vice chairman of the US central bank has said it is difficult to judge whether recent instability in financial markets will impact the Federal Reserve’s decision on interest rates.
“At this point, it is difficult to judge the likely implications of this volatility. If these developments lead to a persistent tightening of financial conditions, they could signal a slowing in the global economy that could affect growth and inflation in the United States,” Stanley Fischer told an audience in New York today.
“But we have seen similar periods of volatility in recent years that have left little permanent imprint on the economy.”
Global stock markets have had a tumultuous start to year, with volatility appearing to emanate from Chinese financial markets.
The Federal Reserve raised interest rates in December after keeping them at record low levels for seven years. It adjusts interest rates to keep inflation at two per cent in a way that ensures a low level of unemployment.
Fischer, who was governor of the Bank of Israel before he joined the Federal Reserve, refused to speculate on whether rates would go up at the next meeting in March. He said:
Now, I expect that in a few minutes one of you will ask not about what we did at our last meeting, but rather what we are going to do at the next one. I can't answer that question because, as I have emphasised in the past, we simply do not know. The world is an uncertain place, and all monetary policymakers can really be sure of is that what will happen is often different from what we currently expect. That is why the Committee has indicated that its policy decisions will be data dependent.