WHILE recently tighter U.S. financial conditions will factor into the Federal Reserve’s upcoming policy decisions, it is “extraordinarily premature” to even talk about using negative interest rates to stimulate the economy, a top Fed official said Friday.

    “To me, that’s not something that should be part of the conversation right now,” New York Fed President William Dudley told reporters at a news conference, when asked about possible use of negative rates.

    The U.S. economy has “quite a bit” of momentum that will help offset weakness from abroad, he said, even as he acknowledged he now expects inflation to take a bit longer to return to the Fed’s 2 percent target because of the drag from the falling price of oil.

    And while there has been “a significant tightening over the last few months” in U.S. financial conditions, he said, “You have to apply a little nuance: while the stock market has declined quite significantly, in recent weeks we’ve seen the dollar actually weaken a bit and we’ve seen Treasury yields fall quite sharply. So even within financial conditions you can’t say it’s all going in one direction.”

    In December the Fed raised rates for the first time since the financial crisis. In January it held off raising them further, flagging growing risks from a slowdown abroad and unsettled financial markets, despite a strengthening domestic labor market.

    Dudley’s remarks suggest the Fed is still gauging how much of a signal to take from a stock market selloff that some analysts said could suggest a recession is around the corner.(SD-Agencies)