NY Fed President Dudley Complains Unemployment is Too Low, Rate Hikes Needed

NY Fed President William Dudley is worried about the low unemployment rate. He thinks the Fed needs to be above neutral.

New York Fed President William Dudley will retire Monday. Current San Francisco Fed chief John Williams will take over.

He departs with one more gem: Dudley Foresees Need for Fed Rate Hikes to Slow the U.S. Economy.

“The federal funds rate will probably have to climb a little bit above neutral, because the unemployment rate is already -- from most people’s vantage points -- below a sustainable level of unemployment consistent with stable inflation,” Dudley told reporters Friday. “So, I think the move will be eventually to a slightly tight monetary policy.”

“I’m sort of expecting that the peak in the federal funds rate in this cycle will be lower than in past cycles, but I have quite a bit of uncertainty about that,” Dudley said during a conference call.

The unemployment rate is too low now, so we need to hike.

Last year he said consumers should "unlock" housing equity to boost the economy.

“The previous behavior of using housing debt to finance other kinds of consumption seems to have completely disappeared,” and people are leaving the wealth generated by rising home prices “locked up” in their homes.

“A return to a reasonable pattern of home equity extraction would be a positive development for retailers, and would provide a boost to economic growth.”

By the way, the Housing ATM is Back (But it won't work any better this time).

Dudley is a real gem. He will be missed for the comedy he provides.

Mike "Mish" Shedlock

Comments
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RonJ
RonJ

Wasn't the FED supposed to have been raising rates when unemployment got down to 6.5%? All they did was make excuses as to why they didn't.

Steve Bull
Steve Bull

One must remember we are rationalizing animals, not rational ones. With little to no 'skin in the game', it's quite easy (and non-consequential) to make all sorts of silly comments about any and everything. That people continue to take economists at the Fed, or any other central bank, seriously is baffling, given their continual 'mistakes'. But, then again, I do check in on the weather forecast beyond the 2-4 hours that tends to be 'accurate'.

Realist
Realist

Snow dog. If i had a job opening that needed to be filled, I would hire someone with the right education and skills first. If, like many businesses today, I couldn’t find that person, I would hire and train someone else. The fact that millions of jobs currently sit empty means that the business is not the problem. It is the lack of suitable workers to hire.

Realist
Realist

Hi Stuki. Try telling someone who can’t land a job that “there is no such thing as unemployment”. Governments in developed countries have been doing something “meaningful” for a hundred years. It's called education and training. It’s why those countries “developed” in the first place. Countries with the best educated and most highly skilled populations have a distinct competitive advantage over countries that don’t. Your laissez-fare concept of the world is appealing because it requires no effort, but the reality is that mankind must put forth effort to fight the universe’s natural state of chaos. Which brings a question to mind; why do you bother to post anything at all?

Stuki
Stuki

The whole pretense that there exist some economically meaningful, measurable quantity out there called “unemployment,” is so misguided from the get-go, as to render anything derived from it nothing more than a sad joke.

Pay anyone a quadrillion a millisecond, and they’ll work a little bit more than they do now. Cut their take home to something infinitesimally above nothing, and they’ll work less. Give them a good alternative to schlepping it to work, like a home team in the World Cup soccer final, and they’ll all be “unemployed” for a few hours.

Leisure is a good, no different in any way from Ferraris. More of it beats less of it, but there’s limits how much you can afford. Priorities change over time, including how one values one good vs another. At no point does one magically cross a line in the sand from “unemployed” to “employed,” as there is simply no such line to cross. It’s all a continuum, with every single person (and non-person) having a different preference set every single day (or millisecond..).

The only meaningful thing government, including the Fed, can do to combat any economic so-called malady, is to do nothing that reduces economic efficiency. Since this, per definition, creates more resources per hour of labor input. Leaving people in a better position to trade off labor vs leisure, and leaving the amount of added output available in exchange for hiring another hand for another hour greater.

Dicking around, making up childish, inane categories like “unemployment” and (price)“inflation,” then pretending those arbitrarities somehow have a life and meaning on their own, is no more useful in (pseudo)economics than in any other field the progressives have brought similar penchant for Newspeak to bear on. It’s all nothing but made up, 100%, pure nonsense. Makework for idiots without even the insight to realize all they ever have, and ever will, spent their life on, is pure, pointless waste and folly.

Snow_Dog
Snow_Dog

Or else hire all the underemployed to do the jobs they are already trained for, even if it means actually having to pay them the going rate for their services.

Realist
Realist

Unemployment can go a lot lower. Simply train all the unskilled unemployed to fill all those empty jobs.

truthseeker
truthseeker

I need to make a correction here since the week long chart of the Chinese Yuan correlation to gold which I viewed is inverted yet this really doesn’t change the overall dynamic imo.

Casual_Observer
Casual_Observer

This may be the dumbest Fed comment ever. If they aren't thinking of the consequences of raising rates on the bond markets including junk bonds and other "investment grade" bonds, then they have no idea what they are doing. We are so screwed when the next crisis hits that no one will know what the hell happen and how it all went so south so quickly. Anything that pulls in future spending will only result in something worse later on.

Bam_Man
Bam_Man

We are in the twilight of the Keynesian era - which has already lasted long beyond it’s actual shelf life - so the nonsensical gobbledegook that emanates from its designated, establishment mouthpieces will become ever more detached from reality. Enjoy!

Tengen
Tengen

And without any sense of irony we make fun of tribal people who went to shamans for advice or tried to read tea leaves. We've come a long way, baby.

At least with the soothsayers of old the readings were unpredictable. To be a Fed priest only a willingness to tell people to incur more debt and favor large banks is required. People used to try to predict the future, now we try to claw future earnings into the present with fake math!

truthseeker
truthseeker

Just wondering did his comment come before or after the precious metals got hammered or did it have more to do with gold having to drop to maintain its near perfect correlation to the Chinese currency?

Mike Mish Shedlock
Mike Mish Shedlock

Editor

You know and I know that he doesn't know. And he does not know the neutral interest rate either. So how the hell does he know what "slightly" tight is? He doesn't. The only use for Dudley is humor.

FloydVanPeter
FloydVanPeter

How the heck does Dudley know what the unemployment rate should be?

And, by which measurement method?

Snow_Dog
Snow_Dog

Do these Fed governors have to publicly reveal their financial assets? What is in this clown’s personal portfolio?

Doesn’t matter much since he’s retiring, but it reveals where he put his money and if that matches where his mouth has been.

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