Williams, in an interview with The Wall Street Journal on Friday, wouldn’t say whether rate increases at the Fed’s Sept. 16-17 meeting are now in order. Instead, he sounded like a man very much on the fence, reflecting the broader internal debate within the central bank.
“All of the data that we have had up until now has been, I think, encouraging. It has been about as good, or better, than I was expecting, in terms of the U.S. economy,” Williams said. “But there are some pretty significant — and I would say have now grown larger — headwinds that have developed.”
Williams points to the risk of moving too soon. “We all want to keep the expansion going. We still have a ways to go. So we don’t want to in any way hamper the economy from getting back to full employment and 2% inflation,” he said. “But at the same time I do think there are risks of waiting too long.”
In June he projected two interest-rate increases this year. Now he hedges on whether the Fed will act even once. It depends, he said, on how the central bank assesses the new risks that have materialized in the past few months. If the risks don’t look so threatening, then he could see “interest-rate increases some time later this year, or an interest-rate increase.”