(Reuters) - The Federal Reserve might hike U.S. interest rates later this year as long as inflation firms and Greece and other international wildcards do not get in the way, a top Fed official said on Friday.
Boston Fed President Eric Rosengren, a dovish U.S. central banker, said negotiations over Greek debt and a slowing Chinese economy were among the possible disruptions that could delay the beginning of tighter U.S. monetary policy, though they hadn’t altered expectations yet.
Questions remain over inflation, the U.S. dollar, and energy prices, so for now the central bank continues to await data that confirms its belief that the U.S. economy will continue to improve, he said.
“Were the U.S. economy to unfold as I and other policymakers expected in our June forecasts, beginning the policy normalization process later this year might be appropriate,” said Rosengren, who does not have a vote on the Fed’s policy committee this year.
He said a 2015 rate hike was the expectation of both financial markets and Fed policymakers, but warned that the central bank’s inflation and job market forecasts are subject to “considerable uncertainty.”
“The emergence in recent weeks of questions about whether Greece and its creditors can reach a viable agreement complicates projections about how economic conditions are likely to unfold over the course of the summer and beyond,” said Rosengren.
The Fed has kept rates near zero since late 2008 to boost the economic recovery from a recession that sent unemployment as high as 10 percent. The rate has fallen to 5.3 percent.
Rosengren, who has long argued for more accommodation than others at the Fed, said he downgraded his assessment of full U.S. employment to 5 percent from 5.25 percent previously, another sign that he is in no rush to hike rates.
He said that estimate could go yet lower, and noted that despite the drop in joblessness, wages have not grown “particularly rapidly.”
Reporting by Jonathan Spicer; Editing by Chizu Nomiyama