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In a speech this week, outgoing New York Fed President William Dudley said he’s confident that the Federal Open Market Committee is close to its objective of full employment and price stability, but uncertainties around trade and the federal budget will be its main challenges moving forward, CNBC staffer Jeff Cox reports.

"On a personal level, I am pleased that I will be leaving my current position at a time when the FOMC is likely to be very close to its employment and inflation objectives — recognizing, of course, the terrible damage of the financial crisis and the long time it has taken to get here," Dudley said during a speech at Lehman College in the Bronx. "Uncertainty about trade policy and the fact that we are now on an unsustainable fiscal path, however, have raised the longer-term risks."

According to Cox, Dudley said the Fed should continue with rate increases until it reaches a neutral level that is neither overly stimulative nor restrictive (barring any major policy disruptions).

"Over time, how U.S. trade policy evolves will have important implications for the performance of the U.S. economy — and, by extension, for U.S. monetary policy," he said. "By increasing uncertainty around the economic outlook, these shifts in fiscal and trade policy could make it more difficult for the FOMC to achieve its dual mandate objectives in the years ahead."

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