Investing.com - Boston Federal Reserve Bank President Eric Rosengren said Monday financial markets are too pessimistic in their view of rate increases over the next few years.
"While I believe that gradual federal funds rate increases are absolutely appropriate, I do not see that the risks are so elevated, nor the outlook so pessimistic, as to justify the exceptionally shallow interest rate path currently reflected in financial futures markets," Rosengren said in a speech prepared for the American Savings Foundation.
Rosengren, a voter this year on the policy making Federal Open Market Committee, elaborated on an idea he put forth in an April 4 speech on cyber and economic risks. He also warned Monday of the need to hike faster if the FOMC waits too long to raise rates, sounding like some of his more hawkish colleagues.
"In my view the very shallow path of rate increases implied by financial futures market pricing would likely result in an overheating that necessitates the Fed eventually raising interest rates more quickly than is desirable, which could endanger the ongoing recovery and continued growth," he said. On Monday, futures showed only about 12% expected rate hike at the June meeting, and the odds of a hike at the December meeting were only about 50%.