Hurricanes Harvey and Irma actually will lead to increased economic activity over the long run, New York Fed President William Dudley said in an interview.
Speaking just as Irma is about to start battering Florida as a Category 4 storm, Dudley said the initial impact in both human and economic costs will be harmful. But in the long run, economies tend to snap back from such major events.
"Those effects tend to be pretty transitory," Dudley said in a live interview with CNBC. "The long-run effect of these disasters unfortunately is it actually lifts economic activity because you have to rebuild all the things that have been damaged by the storms."
Dudley added that he didn't think the near-term economic damage would have much effect on Fed policy. He still believes the central bank will begin unwinding its $4.5 trillion balance sheet
"relatively soon" though he acknowledged that the timing of the next rate hike is up in the air.
In their most recent projections, Fed officials indicated one more rate hike this year on top of the two they already approved earlier. However, weak inflation data have led to dovish statements from Fed speakers, leading market participants to believe the next hike won't happen until well into 2018.