Federal Reserve Vice Chairman Stanley Fischer said policy makers will consider global growth as they begin to raise interest rates, and that they could increase them more gradually should the world economy falter.
"If foreign growth is weaker than anticipated, the consequences for the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise," Fischer said in a speech prepared for delivery Tuesday at Tel Aviv University.
The Fed will weigh how raising rates will affect other nations, said Fischer, 71, a former governor of the Bank of Israel. While tightening will probably will cause spillovers, the Fed is working to communicate policy changes clearly to smooth the transition, and emerging market economies are in better shape to endure the shift than in recent years, he said.
Fed policy makers preparing to raise rates they've held near zero since December 2008 are working to engineer a smooth tightening and avoid the volatility spurred by the so-called "taper tantrum" that roiled global markets in 2013.
"The actual raising of policy rates could trigger further bouts of volatility, but my best estimate is that the normalization of our policy should prove manageable" for developing nations, Fischer said. "We have done everything we can, within the limits of forecast uncertainty, to prepare market participants for what lies ahead."
Fed Chair Janet Yellen said last week that she still expects to raise rates this year if the U.S. economy meets her forecasts, with a gradual pace of tightening to follow.
Echoing the Fed's April statement, Yellen said she expects the economy to return to a "moderate" pace of growth after a disappointing first quarter as headwinds including a cooling global economy gradually abate.
