Dudley Says Fed Needs U.S. Economy to Run ‘A Little Hot’

Inflation running below the Federal Reserve’s target argues for “patience” on interest-rate increases and may require letting the economy run “a little hot,” New York Fed President William C. Dudley said.

“Depending on where inflation is, I can certainly imagine a scenario where the unemployment rate dips a little below” what the Fed considers maximum employment, he said today in an interview with Matthew Winkler, editor-in-chief of Bloomberg News. “We really need the economy to run a little hot for at least some period of time” to push inflation back up to the 2 percent objective, he said.