Key components of the U.S. economy remain healthy, and recent speculation about the Federal Reserve adopting negative interest rates is "extraordinarily premature," a top Fed official said Friday, amid mounting concerns about slowing growth.
"If things were to turn in a surprising direction and the outlook in the U.S. were to deteriorate sharply, I think there are a lot of things that we would do long before we would really think about moving to negative interest rates. So to me, that's not really something that should be part of the conversation right now," New York Fed President William Dudley said in response to a question following the release of the bank's household debt and credit report.
Dudley said monetary policy remains "quite accommodative" after the Fed's decision to hike interest rates in December. Policy has only "limited" ability to respond to volatility with rates already low, he said.
Dudley, a voting member on the Fed's policymaking committee, spoke a day after Fed Chair Janet Yellen wrapped up two days of testimony to Congress. She faced several questions about whether the Fed would follow its counterparts in Europe in Japan to adopt negative interest rates, and left open the possibility that the Fed could do so. However, she noted that the Fed would first need to judge whether it would be appropriate.