Fed official warns September rate hike could happen

US-USA-America-Federal-Reserve-Fed-700x450.jpgNew York Fed President William Dudley says that markets are complacent about the next US rate hike, hinting one could come in September.

The Fed official, who is vice chairman of the Federal Open Market Committee and thought to be aligned with chairwoman Janet Yellen, warned that investors may be underestimating the likelihood of a raise to borrowing costs, reports Bloomberg.

“We’re edging closer towards the point in time where it will be appropriate, I think, to raise interest rates further,” he says. When quizzed on a September rate hike he said: “I think it’s possible.”

“We are looking for growth in the second half of the year that will be stronger than the first half. I think the labor market is going to continue to tighten, and in that environment I think we are getting closer to the day where we are going to have to snug up interest rates a little bit,” he says.

Following the remarks federal funds futures rate, which show market expectations of a rate hike, rose to 50 per cent, the highest rate since June last year.

Data calculated by Bloomberg shows a rise from 44.9 per cent to 50 per cent that the Fed will hike rates again this year.

Minutes of the Fed’s July meeting will be released today, providing more insight into the FOMC’s thinking on holding rates at the last meeting.