The U.S. federal funds rate will likely increase before the end of this year, but the Federal Reserve has "no plans" to hike regular interest rates, Fed Vice Chairman Stanley Fischer said on Monday.
Speaking before the Economic Club of New York, Fischer said that a rate increase will occur when the benefits outweigh the costs. A hike will be appropriate when the Fed sees "further improvement in the labor market" and is "reasonably confident" that inflation is moving back to 2 percent.
Fischer is a voting member on the Fed's policymaking committee. When the Fed removed "patient" from its most recent policy statement last week, it raised questions of when exactly the U.S. central bank would move to normalize interest rates.
The Fed has tools to control the federal funds rate after the first rate hike, Fischer said. He noted that rate increases will likely not follow a "smooth path upward."
He distinguished the movement from the regular increases implemented by the Fed between 2004 and 2007. "Post-liftoff economics" will influence the Fed's decision making after the first hike, Fischer said.