(Bloomberg) -- Federal Reserve Bank of New York President William C. Dudley said he expects the U.S. central bank to raise interest rates by December, while cautioning that this was not a pledge to action and will depend on the economy staying on track.
Dudley told CNBC television in an interview Friday that he was still in the 2015 liftoff camp.
"Based on my forecast, yes I am, but it's a forecast. And we're going to get a lot of data between now and December," he said. "It's not a commitment."
The policy-setting Federal Open Market Committee meets on Oct. 27-28 and Dec. 15-16. Dudley said that every FOMC was 'live' for policy action and he supported the FOMC decision last month to leave rates unchanged near zero. Minutes of that meeting showed that officials wanted to wait and see if slowing growth in China would undermine their confidence that low U.S. inflation will rise back up to their 2% target as expected.
Last month's FOMC decision, and a disappointing September U.S. employment report, has sapped investors' confidence the Fed will be able to raise rates this year, as Fed Chair Janet Yellen has said she expects will be warranted. The probability of a 2015 hike is now priced around 40% in federal funds futures markets, compared to above 60% ahead of last month's FOMC, based on the assumption that the effective fed funds rate will be 0.375% after liftoff.
Dudley said the key to liftoff will be whether the labor market continues to improve, thereby putting more upward pressure on wages and inflation. Last month's jobs report was "definitely weaker," but even monthly gains of 120,000 or 150,000 are enough to continue to push the U.S. unemployment rate lower, he said.
U.S. employers added 142,000 new jobs in September, which was below the lowest forecast of economists surveyed by Bloomberg News. The Fed's preferred gauge of price pressures rose 0.3% in the 12 months through August and has been under its target since April 2012.
"I think we're talking about an economy that is growing a bit above trend, the labor market is gradually tightening, and if we think that's going to continue," he said, "then we're setting the stage for liftoff."
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