An interest rate liftoff by the U.S. Federal Reserve should come in September, Richard Fisher, former president and chief executive of the Dallas Fed said in an interview with CNBC.
"I would personally expect that the odds are highest for September. You don't want to do something in December because that's when the markets are so thin and you could have a reaction that is perhaps more exaggerated."
The Fed trimmed
interest rates to record lows and implemented quantitative easing (QE) in the wake of the financial crisis, directed to stimulating growth in the U.S. economy.
The Fed tapered off its monthly bond-buying program after the economy gave signs of a pickup, and now all eyes are directed toward rate hikes.
This would be a slow process, but needed to begin sooner rather than later, said Fisher, who was known as a policy "hawk" (opposed to further easing) during his time at the head of the Dallas Fed, from 2005 until his retirement in 2015 and has previously called for a "prompt" rate hike, CNBC notes.
So far, "dovish" members of the Fed's monetary policy committee (FOMC) have been reluctant to raise rates thinking that such a move could damage the economic recovery.
The U.S. economy stalled in the first quarter of
2015, shrinking at an annual rate of just 0.2 percent - well below
the 2.2 percent growth recorded in the fourth quarter of 2014.
The central bank has always said a hike would depend on improving U.S.
employment data and the rate of inflation moving towards 2 percent.
In May, U.S. consumer prices grew 0.4 percent, according to the Bureau of Labor Statistics.
Fisher admitted that monetary policy takes much time to work itself into the system.
"I view it as a large tanker at sea that takes a long time to turn, with highly-explosive fuel on board – these excess reserves they've piled up on the Federal Reserve's balance sheet of $2.65 trillion," Fisher said.
It was only a matter of time for a rate hike, he added.
"Even if we have a raise of 25 basis points in September, that doesn't mean it would follow through (with another rise) at the next meeting."
