Fed’s Williams appears to back September rate hike
San Francisco (Aug 19) Fed President John Williams said Thursday that he would like to see another interest-rate hike “sooner rather than later,” suggesting he is in the camp that would be in favor of a move at the next meeting in late September.
“The broader national economy is in good shape,” Williams said in a speech prepared for delivery to a business group in Anchorage, Alaska.
“In the context of a strong domestic economy with good momentum, it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later,” Williams said.
The San Francisco Fed president isn't a voting member of the Fed policy committee but is seen as an influential figure due to his close ties with Fed Chairwoman Janet Yellen.
Fed officials raised interest rates last December for the first time since the financial crisis. At the time they penciled in four moves in 2016 but have since scaled back their expectations given uncertainties about the strength of the domestic and global economies. Most officials, like Atlanta Fed President Dennis Lockhart, now talk about “at least one” move this year.
Analysts think the Fed is likely to raise rates at one of the three meetings left in 2016 but most believe the U.S. central bank will wait until December.
Traders are also slowly coming around to the notion of Fed action this year although they also don’t see a move until year-end.
Even New York Fed President William Dudley’s comment on Tuesday that a September move was “possible” failed to persuade the market that a rate hike could come as soon as five weeks from now.
Minutes of the Fed’s last meeting in late July show an almost even split between supporters of another rate hike in the near-term and others who would wait for more confidence that inflation was stirring.
Read: Fed was split in July over whether an interest rate would be needed soon
In his remarks, Williams said the Fed couldn’t wait for inflation to emerge.
“If we wait until we see the whites of inflation’s eyes, we don’t just risk having to slam on the monetary policy brakes, we risk having to throw the economy into reverse to undo the damage of overshooting the mark,” he said.