The Fed’s latest economic forecast sees interest rates a little above 1% by the end of next year and just under 2% in 2018.
“My own view is that if the unemployment rate falls as much as I’m expecting, then it is possible that we’ll have to raise rates faster than the summary of economic projections,” Rosengren said in an interview with CNBC.
Rosengren said he thinks the unemployment rate will drop to around 4.5% by next year. He said he was concerned this was unsustainable, and may force the Fed to hike rates much more quickly than he hoped would be needed.
The Boston Fed president said some new research has cast doubt on whether disaffected workers will continue to return to the labor force and keep the unemployment rate from falling.
Traders have priced in a small chance that the Fed will move at its next meeting on Nov. 1-2 given that it is six days from the presidential election. At the same time, investors have priced in a greater than 60% chance of a rate hike at the Fed’s December meeting, when Fed Chairwoman Janet Yellen is scheduled to hold a press conference.
“To me that seems quite appropriate,” Rosengren said Friday. “We have tended to move around the time the Fed chair has a press conference,” he added.
The Boston Fed president was one of three dissenters at the September Fed meeting, wanting the central bank to lift interest rates by a quarter percentage point.