WASHINGTON?Federal Reserve governor Daniel Tarullo on Tuesday said the central bank should still proceed cautiously as it decides whether to lift interest rates despite stronger recent data.
The Fed's regulatory point man said that while data over the last several months has shown actual inflation rising, moderately higher wage growth, and slightly higher labor-force participation than had been expected, the central bank should continue to proceed slowly in lifting rates. The Fed is scheduled to hold its next meeting of the policy setting Federal Open Market Committee on Dec. 13-14.
"The discussion of when is the appropriate moment for raising rates in order to prevent the economy from overheating too much -- is now from my point of view -- more on the table than it may have been before," Mr. Tarullo said at The Wall Street Journal's CEO Council. Grounds for caution, he said, include the continued slack in the labor market and the concern that the central bank has "fewer tools" to respond to a recession.
"There are reasons to be cautious in moving forward," said Mr. Tarullo. "We obviously don't want to be pushing on the brakes harder than we need to in order to continue the trend of moderate growth."
Separately, Mr. Tarullo said ongoing discussions by the Basel Committee on Banking Supervision to finalize a capital framework by the end of the year will have a "negligible" effect on the largest, most-complex U.S. banks.
He said revisions to the capital rules now being negotiated won't be "particularly significant" for U.S. banks. Still, he stressed the necessity for establishing minimum capital levels for global banks that aren't based on internal models to ensure stability.
Looking ahead to the post-election landscape, Mr. Tarullo declined to speculate on the outcome of pledges President-elect Donald Trump made on the campaign trail to dismantle the 2010 Dodd-Frank financial-regulatory law.
"If changes are made, we will implement faithfully to the changes that Congress makes," said Mr. Tarullo.
Mr. Tarullo said any changes made by Congress should be data-driven. He said the Fed has applied similar thinking in making changes to its annual stress test exercise.
Mr. Tarullo suggested he's not planning to leave the Fed following the election of Mr. Trump, saying he's engaged and enjoying his job. His term expires in 2022.
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(END) Dow Jones Newswires
November 15, 2016 12:35 ET (17:35 GMT)
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