SF Fed’s Williams: Sustainable Growth Will Keep the Strong Economy Going as Long as Possible

  • Williams says looking ahead, he expects “growth to average around 2.5 percent over this year and next”
  • Says “the economy is on course to be as strong as we have seen in many decades and inflation is moving closer to our target. The challenge for monetary policy is to keep it that way”
  • Says the “right direction for monetary policy” includes “three to four rate increases this year and further gradual rate increases over the next two years”

Santa Rosa, California – Today, John C. Williams, President and CEO of the Federal Reserve Bank of San Francisco, described the current economic outlook and gave his views on monetary policy to a meeting of the World Affairs Council of Sonoma.

Williams discussed growth, employment, and inflation and described the outlook as “very positive.” He said that “the current pace of growth is above trend” and that slow labor force and productivity growth are holding down the trend growth rate. He said: “Growth above trend doesn’t necessarily pose a particular risk at this time. But it’s one of the factors I’m assessing when I’m thinking about how to best support economic growth over the medium term.”

Given that the current pace of growth is above trend, Williams’ view “is that we need to continue on the path of raising interest rates.” Discussing monetary policy strategy Williams said: “Note that the rate increases we have put in place so far have not stalled the economy. In fact, the economy continues to steam ahead. For that reason, I am confident that we can carry on the process of gradually moving interest rates up over the next two years while seeing solid growth and historically low rates of unemployment.”

The Federal Reserve Bank of San Francisco (SF Fed) serves the public by promoting a healthy, sustainable economy, and supporting the nation’s financial and payment systems. With offices in Los Angeles, Seattle, Salt Lake City, Portland and Phoenix, the Bank serves the Twelfth Federal Reserve District, which includes one-fifth of the nation’s population and represents the world’s fourth-largest economy. As part of the nation’s central bank, the SF Fed informs monetary policy, regulates banks, administers certain consumer protection laws and acts as a financial partner to the U.S. government.