Federal Reserve Vice Chairman Stanley Fischer said that U.S. policy normalization is likely to be gradual.
“A gradual and ongoing removal of accommodation seems likely both to maximize the prospects of a continued expansion in the U.S. economy and to mitigate the risk of undesirable spillovers abroad,” Fischer said in remarks prepared for a Wednesday event hosted by the International Banking Research Network and the International Monetary Fund.
The vice chairman of the Fed explained that markets have had a “favorable reaction” to the central bank’s policy decisions. Fischer explained that market participants see rate hikes as a signal of “confidence in the underlying prospects for the U.S. economy that in turn has increased confidence in the global outlook: A strong U.S. economy is a major plus for the global economy.”
It’s possible that both domestic and international business conditions could align, Fischer said.
He added that downside risks to overseas economies are noticeably smaller and that foreign growth appears more entrenched.
In Europe, for example, the U.K. decision to leave the European Union “entails many unknowns,” but Fischer said it hasn’t yet “resulted in significant financial market disruptions.”
Fischer also said that China’s economy also seems to be on more solid footing, which has helped stabilize the country’s currency.
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