US tax reform makes sense but it's not the best moment for stimulus, Fed's Dudley says

An overhaul of US tax legislation is sensible, but it is fair to ask whether now is the best moment to inject fiscal stimulus, the US central bank's number two official said.

In an interview with the Journal, William Dudley, the head of the Federal Reserve bank of New York, said any attempt to make the US tax code less complex "makes sense".

However, given the already solid rate of the economic expansion, rate-setters in Washington would be watching closely for signs that tax reforms might result in an overheating economy.

"It would be a reasonable question to ask, is this the best time to apply fiscal stimulus, when the economy’s already close to full employment? It’s probably not the best time."

He also said there was a "reasonable case" to be made for hiking short-term interest rates in December and that the degree of fiscal stimulus might influence the Fed's actions in 2018.