Federal Reserve Bank of San Francisco President John Williams
said Friday the U.S. economy remains on a solid path that will open
the door to interest-rate increases in the summer.
In an interview with CNBC, Mr. Williams said, "I see a lot of
strength in the domestic economy," adding there's "a lot of
momentum for very good growth." He indicated he is not worried by
the unexpectedly soft 2.6% fourth-quarter gross domestic product
reading reported earlier Friday, and predicted 2015 will see
activity rise by about 3%. Mr. Williams also expects to see the
economy near "full employment" by year-end, with the jobless rate
hitting 5% from its current 5.6% level.
All of that opens the door for the Fed to raise rates off their
current levels near zero. "Around midyear is a good guess for when
we are getting around that point that raising rates will be
appropriate," Mr. Williams told CNBC. "I'm not predicting it will
be June or any particular meeting, but I think we are getting
closer to that point" when the Fed can start to act, he said.
Mr. Williams is a voting member of the monetary policy-setting
Federal Open Market Committee. That body met earlier in the week.
It continued to prepare the way for rate increases, but signaled
patience in terms of when it would actually move. Most officials
expect to see rates increase this year, with key officials favoring
the middle of the year. Mr. Williams has for some time pointed to
summer as the most probable time to boost rates.
Mr. Williams allowed that inflation levels well under 2% were a
"big story" for the Fed. He continues to believe that after a weak
start to the year on oil-related factors, job market gains and
signs of rising wages will start to push inflation back toward 2%,
a level he sees being attained by the end of 2016.
The Fed should be considering rate rises because it's getting
close to hitting its job goal, Mr. Williams said. That inflation is
short of target shouldn't be a huge issue, because even a modest
move higher on rates would still leave rates at historically low
and very stimulative levels.
Write to Michael S. Derby at Michael.derby@wsj.com
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