Fed’s Williams Advocates Rate Hike

August 18, 2016

Anchorage, Alaska – A return to rate hikes “makes sense,” said a top Fed official today. “In the context of a strong domestic economy with good momentum, it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later,” said John Williams, president of the San Francisco Fed. He made the remarks while speaking to the Anchorage Economic Development Corporation.

The policymaker warned against waiting too long, noting the risks of delayed action: “…if we wait until we see the whites of inflation’s eyes, we don’t just risk having to slam on the monetary policy brakes, we risk having to throw the economy into reverse to undo the damage of overshooting the mark. And that creates its own risks of a hard landing or even a recession.”

In making the case for further policy normalization, Williams cited continued strength in the labor market and an economy closing in on the Fed’s 2 percent inflation goal. “[T]he broader national economy is in good shape: We’re at full employment and inflation is well within sight of, and on track to reach, our target. Under these conditions, it makes sense for the Fed to gradually move interest rates toward more normal levels.”

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/sffed.