Dudley says Fed should 'soon' be ready to raise rates

By Jonathan Spicer

HEMPSTEAD, N.Y. (Reuters) - The Federal Reserve should "soon" be ready to raise interest rates as U.S. central bankers grow confident that low inflation will rebound and that employment remains stable, William Dudley, the influential head of the New York Fed, said on Friday.

"We hope that relatively soon we will become reasonably confident that inflation will return to our 2 percent objective," he said at Hofstra University. Dudley said it was "very logical" to expect that the Fed's inflation and employment conditions would be met "soon," allowing policymakers to "start thinking about raising the short-term interest rates."

Most Fed policymakers, along with odds in financial markets, point to a policy meeting on Dec. 15-16 as a likely time for the first rate hike in nearly a decade. Dudley did not say directly that he expected to move before year end, a comment he has made in the past.

"I can't tell you when we're going to do it because it will depend on the data," said Dudley, a close ally of Fed Chair Yellen and a permanent voter on the policy-making Federal Open Market Committee. "We have a month until the next FOMC meeting so my view is let's see what the data is over the next four weeks."

Asked about economic fallout from last week's attacks in Paris and from the broader conflict in the Middle East, Dudley said it was difficult to predict.

"The Middle East is a wild card in terms of what are the implications ... for terrorism around the world and our ability to combat terrorism around the world and that is very difficult to forecast" and, along with the Paris attacks, "to build into your economic forecast," he said.

"Hopefully it won't affect (the international growth outlook) very much because hopefully we will do our job in fighting back," he added.

(Reporting by Jonathan Spicer; Editing by Meredith Mazzilli)

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