Fed’s Williams on Accommodative Stance: “The Bottom Line is, it has Worked”

June 30, 2014

San Francisco, 30 June, 2014 — The Federal Reserve’s continued accommodation has been absolutely the right stance to take, John C. Williams, president and CEO of the San Francisco Federal Reserve said today.

“It was Milton Friedman—one of the greatest economists of the past century and a leading expert on the Great Depression—who taught us that when inflation is too low, monetary policy needs to do more than just lower short-term interest rates near zero,” Williams said. “That’s what we’ve done and it’s worked. We’ve avoided deflation and helped the economy start moving back towards normal.”

In remarks to the Utah and Montana Bankers Associations, Williams addressed common criticisms of the Fed’s easy-money policies over the past several years. Responding to complaints that the Fed’s actions after 2010 were too interventionist, Williams noted, “When you break a leg, you don’t just snap the pieces back into place; you leave the cast on until the bone heals. Otherwise, you risk doing even greater damage. And in this case, the economy wasn’t ready to walk on its own. “

Williams also stressed that the Fed’s so-called unconventional monetary policies, including the large-scale asset purchases program commonly referred to as quantitative easing, are not “radical” or “unprecedented.” “These policies weren’t dreamed up on the fly,” he said. “They’re different, and they’re unconventional, but they’re not outside the natural realm of central bank theory or practice.”


Matthew Schiffgens
Federal Reserve Bank of San Francisco
(415) 974-3246


The Federal Reserve Bank of San Francisco, with branch offices in Los Angeles, Seattle, Salt Lake City, and Portland, and a cash processing office in Phoenix, provides wholesale banking services to financial institutions throughout the nine western states. As the nation’s central bank, the Federal Reserve System formulates monetary policy, serves as a bank regulator, administers certain consumer protection laws, and is fiscal agent for the U.S. government. Follow us on Twitter at twitter.com/sffedreserve.