As financial conditions ease, it supports the Federal Reserve's decision to remove accommodation, Federal Reserve Bank of New York President William Dudley said on Sunday.

"[W]hen financial conditions tighten sharply, this may mean that monetary policy may need to be tightened by less or even loosened," Dudley said at the Bank for International Settlements' annual general meeting Sunday, according to text posted on the Fed website Monday. "On the other hand, when financial conditions ease — as has been the case recently — this can provide additional impetus for the decision to continue to remove monetary policy accommodation."

However, he warned the Fed needs to keep the global economy in mind when setting policy. "But, given the role of the United States and the U.S. dollar in the global economy and financial system, the Federal Reserve is — and indeed, needs to be — mindful of the international effects of its policy. That is because those consequences can have important potential spillbacks to the U.S. economy and financial markets."

Federal Reserve Bank of New York President William Dudley.
Federal Reserve Bank of New York President William Dudley. Bloomberg News

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Gary Siegel

Gary Siegel

Gary Siegel has been at The Bond Buyer since 1989, currently covering economic indicators and the Federal Reserve system.