March rate rise odds hit 70% after Dudley remarks

The odds of a March rate increase jumped to 70 per cent on Tuesday after the influential head of the New York Federal Reserve said the case for policy tightening had become “a lot more compelling”.

Bill Dudley said in a interview with CNN International, the television network, that data released over the past couple of months have shown that the US economy is on a solid trajectory, and the central bank is more confident now that it will continue to brighten.

“It seems to me that most of the data we’ve seen over the last couple months is very much consistent with the economy continuing to grow at an above-trend pace, job gains remain pretty sturdy, inflation has actually drifted up a little bit as energy prices have increased,” he said, according to a transcript posted by CNN.

Mr Dudley, who votes on the Fed’s policy-setting board, added that he reckons fiscal policy will “probably move in a more stimulative direction” — an allusion to the tax reductions and infrastructure spending push promised by US President Donald Trump.

“So, put it all together, I think the case for monetary policy tightening has become a lot more compelling,” Mr Dudley said.

Mr Dudley’s remarks came on the heels of comments from John Williams, the San Francisco Fed head, who said that an increase in the federal funds rate in March is “very much on the table”.

The probability of a March rate rise rallied to 70 per cent after the two policymakers spoke, from 50 per cent on Monday, and 36 per cent a week ago, according to Bloomberg data.