Fed’s Dudley Dashes The Hopes Of The Hawks, And Says The labour Market Is Too Weak For Tightening

William Dudley

The labour market is going to be weak until the end of 2012, so any quick tightening program would be a mistake, according to New York Fed President William Dudley.

Speaking in Japan, Dudley said, “We’re probably going to have excess slack in the U.S. labour market at least through the end of 2012, and that’s one reason that coloured my view that we shouldn’t be overly enthusiastic about tightening monetary policy too early,” according to Bloomberg.

Dudley’s comments are in stark opposition to those made by Philadelphia Fed President Charles Plosser, who recently presented a strategy for ending U.S. policy easing.

Most of Dudley’s comments were on the reform of the international financial system, where he rejected an international authority driving decision-making for domestic regulators, and suggested the market may already be becoming too complacent.

As the crisis recedes in memory, the natural reflex will be to relax and grow complacent. Already, some bankers are arguing that it is time to get back to “business as usual.” We have seen that “business as usual” results in unacceptable outcomes. So we need to keep working on a continual basis to make the global financial system more resilient and robust. We will not be able to avert all future failures or crises, but I know we can do much better in limiting the frequency, severity and the breadth of their impact when they occur if we keep pushing forward.

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