The Federal Reserve will likely raise U.S. interest rates "sometime next year" and, due to better Fed communications, investors seem to be getting the message of patience in this policy-tightening cycle, an influential U.S. central banker said on Friday.
William Dudley, head of the New York Fed and a close ally of Fed Chair Janet Yellen, said the U.S. interest rate hike would be "welcome" and signal economic health, Dow Jones reported.
He warned that financial market volatility is nonetheless expected as the world's largest central bank prepared to hike rates from near zero. While that will pose challenges for emerging market economies, he said, many of them are better equipped today than in the past.
Dudley repeated that central banks are better off focused on domestic growth and stability, and he again rejected the call by some for explicit global policy coordination to mitigate volatile market moves due to Fed policy changes.
"If all goes according to our forecast and the U.S. economy continues to make progress towards the Fed's dual mandate goals ... the Federal Reserve will likely begin to raise its federal funds rate target off the zero lower bound sometime next year,'' Dudley told the International Symposium of the Bank of France.
In prepared remarks, he said, "markets now seem to understand that policy rates will likely remain exceptionally low for a considerable period of time even now that the asset purchase program has been completed."
Dudley, who has a permanent vote on U.S. policy, has learned some lessons about how poor communications lead to abrupt and unwanted capital flows in both emerging markets and at home.
But, he said, "I believe that it would be taking on too much to attempt to collectively fashion policy in reference to global conditions. Monetary policy meant to suit everybody is likely in the end to suit nobody."
—CNBC contributed to this report.