Williams Says Fed Rate Moves to Block Out Election-Year Pressure

The Challenges For Growth that Central Banks Can't Fix
  • Downturn unlikely through 2017, Williams said on Fox News
  • Central bank probably will raise rates this year, he says

The U.S. economy should be solid enough to merit an interest-rate increase this year, and the central bank won’t cave to political pressure to refrain from tightening during a presidential election year, said John Williams, president of the Federal Reserve Bank of San Francisco.

While global threats to growth, including in Europe and Asia, have forced a “balancing act” against largely encouraging data in the U.S., Fed officials probably will raise the benchmark interest rate sometime this year, Williams said Sunday on Fox News. He doesn’t vote on monetary policy until 2018.

QuickTake The Fed Lifts Off

“It will, in my view, be appropriate to start raising rates again later this year,” whether in June or at a later meeting, Williams said. He downplayed the risk of a U.S. recession through 2017 and said Fed policy wouldn’t be swayed by politicians.

“We’ve proven over and over again that we can act in presidential election years, taking controversial policy decisions. We’ve done that before,” he said. “We’ll do that again. We’re about as apolitical as you can imagine, just focused on our goals.”

Investors see a 28 percent probability that the Federal Open Market Committee will announce an interest-rate increase after its June 14-15 meeting, according to trading in federal funds futures. Williams is not an FOMC voter in 2016.

The San Francisco Fed chief said jobs and inflation data are getting “closer and closer” to the central bank’s twin targets. The unemployment rate was 5 percent in April, while the Fed’s preferred gauge of price growth dropped to 0.8 percent in March, below the 2 percent goal.

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