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US Federal Reserve will gradually increase interest rates: William Dudley

LiveMint logoLiveMint 11-05-2017 Sahib Sharma

Mumbai: The US Federal Reserve will gradually increase interest rates and normalise the central bank’s balance sheet if the economy continues to grow in line with expectations. There will not be dramatic changes in the monetary policy regime in the United States, William Dudley, president and chief executive officer of Federal Reserve Bank of New York, said at an event conducted by Bombay Stock Exchange in Mumbai.

“Federal Reserve has already made it clear that we are looking at thinking through what is the appropriate policy for normalising our balance sheet. The US economic recovery continues apace,” said Dudley.

According to Dudley, the Fed, which has been reinvesting proceeds from mortgage-backed securities into treasuries and mortgaged backed securities, will gradually reduce the amount of assets that they reinvest.

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“We want this to very much run in the background in a very modest, minor way. We will pursue this with great care and caution in the months ahead,” added Dudley.

Dudley believes that expected productivity growth will be lower than the rate at which it was in late 1990s though better going ahead than the previous years.

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