Fed's Rosengren Says Central Bank to Gradually Raise Interest Rates

The Federal Reserve will probably only gradually raise interest rates, irrespective of whether it decides to take the first step a few months earlier or later, a top U.S. central banker said on Tuesday.

The dovish president of the Boston Fed, Eric Rosengren, said a more modest policy tightening cycle than in the past is appropriate because of low inflation and threats to U.S. economic growth.

Dodging the question of whether he would prefer to start hiking rates at a Sept. 16-17 policy meeting, Rosengren, who does not have a vote on the Fed’s policy committee until next year, said U.S. inflation could come under yet more pressure if the economies of China, Japan, and the euro zone slow down, and if recent market turmoil persists.

“There are very good reasons to expect a much more gradual normalization process than occurred in the previous two tightening cycles,” he said of pending rate hikes, adding, “this more modest tightening path is both necessary and appropriate.”

Rosengren downplayed the timing of so-called liftoff, saying it makes little economic difference whether it is moved “forward or backward by a couple of months.”