By Jonathan Spicer
(Reuters) - The Federal Reserve could possibly raise U.S. interest rates as soon as September, an influential Fed policymaker said on Tuesday in comments that boosted the dollar ahead of next week's signature meeting of world central bankers.
New York Fed President William Dudley said that as the U.S. labor market tightens and as evidence builds of wage gains, "we're edging closer towards the point in time where it will be appropriate I think to raise interest rates further."
"It's possible" to hike rates at the next scheduled policy meeting on Sept. 20-21, he said on the Fox Business Network. "We'll have to see where the data falls." The U.S. central bank also needs to watch "the broad supports for the economy" and how inflation plays out "in coming months," he said.
Dudley, a permanent voter on rates and a close ally of Fed Chair Janet Yellen, gave the market-moving interview nine days before the annual meeting of top central bankers in Jackson Hole, Wyoming, a venue the Fed often uses to telegraph policy plans.
His comments, including an unusual warning on low bond yields, were seen as more hawkish than a cautious message last month when in a speech he outlined risks to the economy.
In response, the dollar rose against peers and longer-dated Treasury yields slipped while stocks traded lower - signs that markets thought a rate hike could come sooner than expected.
Futures traders raised bets of a September hike to 18 percent, from 9 percent on Monday, with a 51-percent chance of a December move. A Reuters poll of economists last week also pointed to December - after the U.S. presidential election - as the most likely timing for a hike.
The central bank raised rates from near zero in December last year, its first tightening in nearly a decade, but it has since stood pat amid financial market volatility and stalled economic growth.
Given the U.S. economy grew at only a 1-percent rate in the first half of the year, "we probably don't have a lot of monetary policy tightenings to do over time," said Dudley.
"But the labor market is getting tighter and we're starting to see signs of wage gains starting to accelerate, so I think we're getting closer to that point in time when it will be appropriate to actually raise short-term rates again," he added.
Asked about inflation, which has remained low for years, Dudley said the question is whether there is enough economic growth to put pressure on resources that pushes up wages and, ultimately, inflation. "So far we seem to be on that trajectory and we'll have to see how it plays out in coming months."