Fed's Fisher Sees 'Significantly' Earlier Rate Hike

Stronger US economic data on jobs and inflation have moved the Federal Reserve significantly closer to its first rate hike, making it "very possible" early next year, a top US central bank official said on Friday.

"It would seem to me, and I have been arguing this, that the date of so-called 'liftoff' has been moved forward," Dallas Federal Reserve Bank President Richard Fisher said on a news channel.

"I feel personally that we are closer to liftoff than we were, people felt we were, the market assumed we were, some time late in 2015," Fisher said. "I believe, personally, we have moved that forward, significantly."

The Fed, which has kept interest rates near zero since December 2008, reaffirmed Wednesday it was in no rush to raise rates, even as it upgraded its assessment of the US economy and expressed some comfort that inflation was moving up toward its target. Fed policymakers took note of both faster economic growth and a decline in the unemployment rate, but expressed concern about remaining slack in the labor market.

Fisher, a voter this year on the Fed's policy-setting panel, has repeatedly voiced worries the Fed would move too late to counter inflation.

"At the last meeting, I felt, as I listened to the discussion at the table, that my views were being digested by more and more participants," he said.

Stronger labor market readings were sinking in with colleagues, he said, as were healthier readings on inflation.

In the Fed's post-meeting statement Wednesday, he said, "the way we described being closer to the 2-percent target on inflation, t hat was very important."

Other small wording changes on the state of the economy in the statement also helped, he said.

In future meetings, the Fed may reconsider its promise to keep rates near zero for a "considerable time" after it ends its current round of bond-buying in October.

Also a subject of debate will be the Fed's current guidance that rates will stay below historical norms for some time even after the economy returns to health.

"These are debating points - if and as we change that, that will send signals to the market," he said. "I like right now, personally, sending signals to the market through language. I think we are doing that: I think the last statement indicated that we were more comfortable than we were before."

"That's the reason I didn't dissent," he added. "I was quite happy with the language, it was carefully crafted by the committee."

Fisher said he didn't agree with those who say the Fed should allow inflation to rise above 2 percent to help push unemployment down.

""You can't overshoot and then try to correct" on inflation, he said.

"We've had experience with this before and it's a dangerous place to go, in my opinion."

Copyright: Thomson Reuters 2014