Beaking News

Fed's Williams wants low rates, hot economy in 2016

SAN FRANCISCO (Reuters) - The Federal Reserve will aim to keep the U.S. economy running hot next year to boost the job market and inflation, a top central banker said, and to achieve that goal interest-rate hikes will be slow but will not follow any predictable pattern.

"Every meeting will truly be live in terms of adjusting policy one way or the other," San Francisco Federal Reserve Bank President John Williams told Reuters in an interview, referring to the Fed's policy-setting meetings.

Fresh forecasts from the Fed suggest most policymakers are looking for four rate hikes next year, and Williams said his own view is in line with that expectation.

"You might immediately jump to the conclusion that it's every other meeting," Williams said. "But as we've learned over the last several years, the economy does not always perform as forecast."

Fed officials unanimously backed an increase Wednesday to the central bank's benchmark interest rate target, lifting rates from near zero for the first time since the financial crisis.

After the rate hike, attention turned immediately to the likely timing of the next move. Many economists have latched on to March as the most probable, in part because that would coincide with Fed Chair Janet Yellen's next scheduled press conference.

That may not be the case, Williams suggested.

This was an idea that Yellen, in her news conference immediately following Wednesday's decision, also sought to emphasize, saying that rate hikes, though gradual, would not necessarily be all a quarter of a percentage point or evenly spaced in the calendar year.

"There was value to having the first move at a press conference meeting," Williams said, "but in the future I don't think that's as much of an issue."

In a wide-ranging, hour-long interview at the San Francisco Fed's headquarters, Williams said he expects easy Fed monetary policy to help push the unemployment rate, now at 5 percent, down to around 4.5 percent by the end of next year.

"We are going to run a higher-pressure economy for a while," he said. Inflation, he said, is still running stubbornly low, in part because of falling energy prices and the strong dollar. "I want to get it back to 2 percent," he said.

But by 2017, he said, inflation should be on its way back to the Fed's 2-percent goal.

"I don't need to be getting this economy to run hot, I just need it to be running at kind of a steady pace," Williams said.

That second, slower stage of economic growth, he said, will occur as the Fed gradually raises its target interest rate to around 3.25 percent to 3.5 percent, a level he sees as the likely long-run neutral rate.

Last modified on Monday, 21 December 2015

Leave a comment

About Us

Learnmarketonline is your meeting place; the crossroads where you can find everything you need to make the best decisions in the currency markets. Founded by the talented professionals with huge experience in financial trading.

learnmarketonline strives to deliver the best education and training for everyone who is willing to improve his talents and open new horizons.

Financial Stories

European shares started the week strongly on ...
European stocks opened higher on Monday, ...
Crude oil prices dipped further on Monday ...