Fed’s Fischer: US near full employment, rates will rise gradually

The US has moved near full employment, while inflation is nearing the Federal Reserve’s target, the central bank’s vice chair said on Thursday as he renewed his call for “gradual” rate rises.

Stanley Fischer’s remarks on Bloomberg Television echoed those of his boss, Janet Yellen, the Fed chief who said during two days of grueling Congressional testimony this week that given the improvement in the economy it would be “unwise” to wait too long before tightening policy.

Still, Mr Fischer emphasised his expectations for a very slow pace of rate increases: “It will be a matter of years, not weeks or month,” he said.

The central bank has only increased its benchmark lending rate two times since the end of the 2008 financial crisis.

Mr Fischer’s comments come as some other senior Fed officials have begun to take a more hawkish stance amid rising concern that the economy could overheat if the central bank does not act more quickly.

On Wednesday, Eric Rosengren, head of the Boston Fed, warned on the Fed will need to raise rates by at least three times this year, potentially even more, if it wants to avoid the potential for an “overshoot”.