Fed must consider global impact when raising rates: Fischer

TEL AVIV (Reuters) – The Federal Reserve should weigh the impact of its policy decisions on global economies and should expect spillovers back to the U.S. economy once it starts raising interest rates, a top Fed official said on Tuesday.

“The U.S. economy and the economies of the rest of the world have important feedback effects on each other,” U.S. Federal Reserve Vice Chairman Stanley Fischer said in the text of remarks being delivered in Israel. “To make coherent policy choices, we have to take these feedback effects into account.”

At the same time, he said, the Fed is not the world’s central bank, and will calibrate policy based on its domestic objectives of fostering full U.S. employment and 2 percent inflation.

“We are working to ensure that our financial institutions and other market participants are prepared for the normalization of monetary policy and the return to a world of higher interest rates,” Fischer said. “It is equally important that individuals, businesses, and institutions around the world do the same.”

(Reporting by Ari Rabinovitch; Writing by Ann Saphir Editing by W Simon)

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