Some top policymakers, including Fed Vice Chairman Stanley Fischer, said recent volatility in global markets could quickly ease and possibly pave the way for the U.S. rate hike, for which investors, governments and central banks around the world are bracing.

With a key policy meeting set for Sept. 16-17, at least five Fed officials spoke publicly in what amounted to a jockeying for position on whether increasing the Fed's benchmark overnight lending rate was too risky amid an economic slowdown in China, a rising U.S. dollar .DXY and falling commodity prices XAU= CMCU3.

"It's early to tell," Fischer told CNBC on the sidelines of the annual central banking conference in Jackson Hole, Wyoming. "We're still watching how it unfolds." He, along with other Fed officials, acknowledged that the global equities sell-off that began last week would influence the timing of a rate hike, which until only a couple of weeks ago seemed increasingly likely to occur in September.

Concerns about China's economy have whipsawed markets, including Wall Street, even while U.S. economic data has been robust. U.S. stock indexes ended largely unchanged, capping a week that included both the market's worst day in four years and biggest two-day gain since the 2007-2009 financial crisis.

"I think they could settle fairly quickly," said Fischer, a close ally of Fed Chair Janet Yellen.

St. Louis Fed President James Bullard told Reuters he still favored hiking rates next month, though he added that his colleagues would be hesitant to do so if global markets continued to be volatile in mid-September.

The Fed's policy committee "does not like to move right in the middle of a global financial storm," Bullard, a Fed hawk, said in an interview. "So one of the advantages we have is that this storm is occurring now and, at least as of now, we think it will be settled down" by the September meeting.

The comments suggest the next two and a half weeks will be critical for the Fed as well as for global markets. A U.S. rate hike is expected to hit emerging market equities and currencies particularly hard, adding to the sell-offs already seen.

Source: Reuters