Federal Reserve Vice Chairman Stanley Fischer left open the option of an interest-rate increase next month, walking a line between officials who want to delay due to market turmoil and those who say the economy is strong enough to handle a move.
Fischer said reports on the U.S. economy’s tempo have “been impressive, and the economy is returning to normal,” in an interview with CNBC from the Kansas City Fed’s annual retreat in Jackson Hole, Wyoming.
“I think it’s early to tell, the change in the circumstances which began with the Chinese devaluation is relatively new and we’re still watching how it unfolds,” he said. “I wouldn’t want to go ahead and decide right now what the case is, more compelling, less compelling,” for a September liftoff.
On Wednesday, New York Fed President William C. Dudley said market turbulence made the case for a September move “less compelling to me than it was a few weeks ago.”
Fischer’s remarks place himself between two camps on the Federal Open Market Committee. Officials such as Fed presidents James Bullard of St. Louis and Loretta Mester of Cleveland say the economy’s cumulative gains have been strong and they expect them to continue, and put varying weight on recent market movements.
“My view so far in looking at all of the factors is that the economy can sustain an increase in interest rates,” Mester said in an interview Friday with Bloomberg Television at Jackson Hole.
Another camp is signaling there is little reason to rush and appears to prefer to hold off and determine if there is fallout from market volatility, a slowing Chinese economy and the devaluation of the yuan on Aug. 11.
Fed officials next meet Sept. 16-17. “We’ve got a little over two weeks before we have to make a decision, and we’ve got time to wait and see the incoming data,” Fischer said.
“We haven’t made a decision yet and I don’t think that we should make a decision,” he said. “We’re dealing with something which happened about 10 days ago, particularly the change in the circumstances.”