SF Fed’s Williams: The Challenges of a Strong Economy and Low Inflation Require a Balanced Approach to Monetary Policy

November 29, 2017

  • Williams says his “role as a policymaker is to keep this expansion going for as long as possible”
  • Says “unusually low prices of certain goods and services, combined with the lagged effects of the economy” explain the apparent “mystery” of low inflation
  • Says “if we don’t move interest rates back up to more normal levels, we risk undermining the sustainability of the expansion”

Phoenix, Arizona – Today, John C. Williams, president and CEO of the Federal Reserve Bank of San Francisco, described the current economic outlook and considerations for monetary policy to an audience of executives and business owners at the 54th Annual Economic Forecast Luncheon.

Williams outlined the Fed’s goals as set by Congress: maximum employment and price stability. He discussed the pleasant challenge currently facing policymakers: normalizing monetary policy in the face of maximum employment and low inflation. He said the mystery of low inflation “isn’t all that mysterious.” He emphasized that low prices for certain categories of goods and services and “a delay in the effect of a strong labor market on prices” can explain lower than expected inflation. He therefore anticipates “a rise in inflation in 2018.”

Discussing interest rates Williams said: “As long as the data continues to show steady growth and we see the uptick in inflation that we’re expecting, my own view is that we should continue to raise interest rates slowly over the coming year.” This is against a backdrop of normalizing monetary policy and “slowly stepping back from the extraordinary support the Fed provided for the economy during the recession and thereafter.”


Kevin Sajdak
Federal Reserve Bank of San Francisco
(415) 314-2948


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/sffed.