The Federal Reserve remains on track to raise interest rates three or four times in 2018, but any more than that would be unlikely, New York Fed President William Dudley said Monday.
Market speculation has intensified over how aggressive the central bank will be this year on its path to normalizing monetary policy. Current expectations are for three increases, though traders are watching the trajectory of economic growth and inflation.
"Three or four seems like a reasonable expectation this year," Dudley told CNBC's Steve Liesman during a "Squawk on the Street" interview. "As long as inflation is relatively low, the Fed is going to be gradual. Now, if inflation were to go above 2 percent by an appreciable margin, then I think the gradual path might have to be altered."
During its March meeting, the Federal Open Market Committee approved a quarter-point rate hike in its benchmark funds rate, bringing the target range to 1.5 percent to 1.75 percent. Market participants expect the Fed to move again in June and in September, but are pricing in just a 37 percent chance of a fourth increase by the end of the year.
However, with signs showing that inflation is on the rise, there has been speculation that the Fed could get more aggressive.