SF Fed’s Williams: The Outlook is Positive, but the Economy hasn’t Fundamentally Shifted into a Higher Gear

February 2, 2018

  • Williams says “the economy’s performing almost exactly as expected”
  • Says “Strong financial conditions, better-than-expected global growth, and the tax cuts have all created tailwinds that can account for the healthy pace of growth”
  • Given the current economic outlook, “my view is that we need to continue on the path of raising interest rates”

San Francisco, 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 Financial Women of San Francisco.

Williams assessed growth, employment, and inflation and discussed whether the positive outlook means the economy is “taking off far more than expected.” He said that 2017 growth was above the trend growth rate, and he expects a similar performance this year. He attributes the continued momentum to positive tailwinds, including “strong financial conditions, better-than-expected global growth, and the tax cuts.”

Turning to employment, Williams noted the “unusually low” level of unemployment and emphasized that wage growth, which can be a key driver of inflation, has been “slowly ratcheting up.” Low levels of inflation in the face of low unemployment have led many to ask whether the Phillips curve still holds true. Williams highlighted that the transitory factors holding down inflation “are slowly disappearing from the data.” He noted that recent price data have been encouraging and that he expects that “we’ll continue to see inflation pick up this year and the next.”

Discussing his strategy for monetary policy Williams said: “Given that the pace of growth is somewhat above trend, my view is that we need to continue on the path of raising interest rates. This will keep the economy on an even footing and reduce the risk of us getting to a point where things could overheat.”


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.