WASHINGTON — Federal Reserve Bank of New York President William Dudley Tuesday said the Fed's large, and growing, balance sheet doesn't constrain the central bank's independence, but rather reinforces its commitment to stable prices, while discouraging a premature interest rate hike.

"I think that the size and composition of the Federal Reserve's balance sheet actually creates incentives that reinforce the pursuit of the Federal Reserve's objective with respect to inflation," Dudley said in remarks prepared for a Mexico City panel discussion at the Central Bank Independence Conference, titled "Progress and Challenges in Mexico."

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