San Francisco Fed President Williams sees Rate Hikes Likely in Mid-2015

October 9, 2014

Las Vegas, Nevada — The Federal Reserve will likely lift the federal funds rate in mid-2015, said San Francisco Fed President John C. Williams on Thursday, though that decision is dependent on continued economic improvement and will be “data-driven, not date-driven.” He made the comments in prepared remarks to a luncheon for community and business leaders in Las Vegas.

“…The data will drive our decision—not just how close we are to our goals, but how quickly they come into sight,” He said. “And, assuming the economy progresses as anticipated, rates will likely increase relatively gradually,” he added.

Williams cautioned that the likely end to the Fed’s asset purchase program (“quantitative easing” or “QE”) did not signal an end to accommodative policy, which he said is still necessary to ensure the recovery maintains momentum.

“I want to be clear that monetary policy will remain accommodative for some time, because we’re still quite a way from our goals,” he said. “We have reached a point where we no longer require additional stimulus, and for that reason we’re ending asset purchases. But if we were to withdraw accommodation too soon, progress toward our goals could slow or even stall.”

Williams answered commentators calling for an earlier rise in interest rates, citing the uneven nature of the recovery across the country, continued slack in the labor market, and persistently low inflation. Inflation is still below the Fed’s preferred 2 percent rate, he noted, and recent vacillations should be taken in a broader view. “To adequately judge inflation’s trajectory we need to carefully analyze the data and separate the signal from the noise. Monthly or quarterly numbers, when taken in isolation, can give a false impression of new trends when in fact they are just blips in the data.” He continued: “The signal from all the indicators, both government and independent, point to the same conclusion: Inflation trends are quite modest.”

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