Fed could slow rate hikes if global economy is weak

The US central bank might slow the pace at which it hikes rates should global economic growth prove weaker than expected, a senior official.

“If foreign growth is weaker than anticipated, the consequences for the US economy could lead the Fed to remove accommodation more slowly than otherwise,” US Federal Reserve vice chairman Stanley Fischer said in a speech prepared for delivery on Tuesday at Tel Aviv University.

That comes as markets and other central banks, in particular, make preparations for the expected outflows of capital as the Fed moves to tighten policy.

“Because the dollar features so prominently in international transactions, we must be mindful that our markets extend beyond our borders and take precautions, as we have done before, to provide liquidity when necessary,” Fischer added.

However, in his speech the rate-setter emphasised the best contribution to global financial stability the Federal Reserve – or for that matter any other central bank – could make was to make sure its own house was in order.