Fed's Williams Sees Gradual Hikes as US Economy Stays on Track

Washington (Mar 29)  Federal Reserve Bank of San Francisco President John Williams said the U.S. economy appears to be weathering cooler global growth and he repeated that the central bank will raise interest rates at a gradual pace.

“Despite recent financial market volatility, my overall outlook for both the U.S. and the global economy remains largely unchanged over the past few months,” Williams said in a speech in Singapore Tuesday, according to the text of his prepared remarks. “We took the first small step with a modest rate hike in December, and the future pace will be, as we’ve said repeatedly, gradual and thoughtful.”

Fed officials are discussing how quickly they should raise rates a second time following their first hike for nearly a decade in December. Williams didn’t comment on the timing in his text, though he was among Fed officials who last week said increases could be considered as soon as April.

“I see continued growth in the U.S., and I don’t see the global situation as dire,” Williams said. “The ability of governments and central banks to respond to their own needs while navigating global conditions may not be a miracle cure, but it offers stability.”

Steady Growth

Williams said he expects the U.S. economy to expand at “a bit above 2 percent this year,” pushing the unemployment rate down to around 4.5 percent by the end of 2016.

“On the inflation side, we’re not quite where I’d like us to be, but recent developments have been very encouraging and add to my confidence that we’re on course to reach our goal” of 2 percent, he said.

Williams is a former head of research for Fed Chair Janet Yellen when she ran the San Francisco Fed. Yellen will give her take on the U.S. economic outlook later on Tuesday with a speech in New York.

Source: Bloomberg