Fed's Williams wants low rates, hot economy in 2016

Fri Dec 18, 2015 8:48pm EST
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By Ann Saphir

SAN FRANCISCO (Reuters) - The Federal Reserve aims to keep the U.S. economy running hot next year to boost the job market and inflation, a top central banker said, and to achieve that goal interest-rate hikes will be slow but will not follow any predictable pattern.

"Every meeting will truly be live in terms of adjusting policy one way or the other," San Francisco Federal Reserve Bank President John Williams told Reuters in an interview, referring to the Fed's policy-setting meetings.

Fed officials on Wednesday unanimously backed an increase to the central bank's benchmark interest rate target, lifting rates from near zero for the first time since the financial crisis. The policy meeting had been widely anticipated as ending in a rate hike.

Afterwards, attention turned immediately to the likely timing of the next move. Many economists have latched on to March as the most probable, in part because that would coincide with Fed Chair Janet Yellen's next scheduled press conference.

Fresh forecasts from the Fed suggest policymakers are looking for about four rate hikes next year. Williams - who worked for Yellen when she ran the San Francisco Fed before handing the reins to him, and whose views are seen to align closely with hers - said his own view is in line with that expectation. The Fed meets eight times a year.

"You might immediately jump to the conclusion that it's every other meeting," Williams said, referring to the likely timing of next year's rate increases. "But as we've learned over the last several years, the economy does not always perform as forecast."

Though much more optimistic about the economy than in prior years, Williams said that at the end of this week's meeting, there was no round of high-fives among the 17 policymakers at the table.

"We are not done: we still have inflation unquestionably running stubbornly low due to mostly, I think, global factors," he said.   Continued...

John Williams, president of the Federal Reserve Bank of San Francisco, speaks during an interview with Reuters in San Francisco, California December 18, 2015. REUTERS/Stephen Lam