Key Fed official slams U.S. tax cuts for imperiling economy

NEW YORK (Reuters) – One of the Federal Reserve’s most influential members on Thursday offered a point-by-point critique of U.S. President Donald Trump’s sweeping tax cuts, warning they put the country on an unsustainable fiscal path that will imperil the economy’s stability down the road.

New York Fed President William Dudley, a key architect of the U.S. central bank’s decade-long response to the financial crisis, said the cuts to corporate and individual taxes will provide a short-term boost but leave the economy more vulnerable in the years to come.

The comments from Dudley – in which he maintained a “strong case” for the Fed to keep gradually raising interest rates – suggest that while the central bank has little reason to curb the fiscal stimulus, its policymakers will not hesitate to criticize its timing and assumptions.

“The economy has considerable forward momentum, monetary policy is still accommodative, financial conditions are easy, and fiscal policy is set to provide a boost. But, there are some significant storm clouds over the longer term,” Dudley, who is set to step down in mid-2018, told a Wall Street forum.

The tax cuts, he said, “will come at a cost. After all, there is no such thing as a free lunch.”

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