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When determining the strength of the economy and whether an interest rate hike is necessary the Federal Reserve typically pays attention to jobs reports and consumer spending data, but New York Fed president William Dudley said the Fed should start tracking the stock market as well.
Stocks are volatile and prices can change quickly, but Dudley said market swings have a big impact on consumer spending with their ability to leave investors feeling either rich or poor, Bloomberg reports. While changes in consumer spending will eventually show up in reports, Dudley said examining the stock market could give the Fed an earlier signal into shifting economics.
If Dudley’s approach catches on it is likely the Fed will raise interest rates higher and quicker, considering the stock market is up more than 10% since President Donald Trump’s election. Fed Chair Janet Yellen is paying attention, especially after she said stock market gains are likely to boost consumption after raising rates on March 15.
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