Two rate hikes possible in 2016, Fed's Fischer says

Even two rate hikes before 2016 was out were possible, a top US central bank official said.

Following US Federal Reserve chair Janet Yellen's speech earlier in the day, her number two at the Fed, vice-chair Stanley Fischer, told CNBC her comments were consistent with a possible September hike and two rate hikes before 2016 was out.

"But these are not things we know until we see the data [...] because the picture is a very complex one," he added.

There was a case for fiscal policy and infrastructure investment in order to boost productivity, but those decisions were the remit of Congress and the President, he said.

The upcoming US elections could also influence things happening in the economy, Fischer said, but the central bank would only react to signals of uncertainty that might be reflected in the economic data it would not try to become a political forecaster.

"Dr. Yellen stated clearly, though, that some of the other tools currently being discussed by “observers" - aka the Fed's very own John Williams - such as raising the inflation target or targeting nominal GDP, are "not actively" under consideration. Instead, Dr. Yellen made the usual observation that stronger productivity growth would be wonderful, but she offered no new ideas.

"And she gently asked Congress to think about how it would respond to the next downturn: "…a wide range of possible fiscal policy tools and approaches could enhance the cyclical stability of the economy". Good luck with that," Ian Shepherdson, chief economist at Pantheon Macroeconomics said in a research report sent to clients.

As of 1918 BST the yield on the benchmark two-year US Treasury note was at its intra-session high, rising four basis points to 0.8329%.

The chances of a 25 basis point rate hike at the Fed's 14 December policy meeting stood at 57.2%, the CME's Fed Watch toll showed.