If Hillary Clinton was worried that the Federal Reserve could endanger her campaign by sparking a recession with rate hikes later this year, a top official said on Tuesday she shouldn’t be.
William Dudley, the president of the Federal Reserve Bank of New York, said the central bank won’t choke off growth even if it does choose to resume raising rates.
“If we decide to raise rates, it’s because the economy’s doing well,” Dudley said in an interview with Fox Business.
“It’s not the beginning of a tightening cycle that’s designed to squeeze off economic growth,” he added. Rather than slowing growth, he explained, higher interest rates would be intended to keep the economy growing while maintaining stable inflation.
Some commentators have suggested that the Fed could be a wild card for Clinton’s campaign. A weak economy hurts the incumbent party’s chances, meaning that a move by the Fed to slow growth could handicap the Democratic nominee, the thinking goes. But Dudley dismissed that logic, saying that if the Fed does raise interest rates, it wouldn’t be with the purpose of harming growth.
As head of the New York Fed, Dudley is the vice chairman of the Fed’s monetary policy committee.
Dudley said he believes that the U.S. is “edging closer” to the conditions that would merit further interest rate increases from the Fed, which raised rates once in December but since then has held them steady. Dudley suggested that the central bank could act as soon as September if economic indicators show commerce picking up.
And while the election could create uncertainty and delay some businesses from investing, Dudley said those factors are “hard to judge.” Politics, he claimed, wouldn’t factor into the Fed’s decision-making.
