Federal Reserve Bank of San Francisco President John Williams said Saturday he’s still eyeing a central bank rate rise, noting it is important to get the process going so that future increases can come at a gradual pace.
But the official, who holds a voting role on the interest-rate-setting Federal Open Market Committee, declined to say when he’d like to boost borrowing costs from their current near-zero levels.
“I view the next appropriate step as the start of a process of gradually raising interest rates,” Mr. Williams said in a speech delivered before an audience in Tempe, Ariz. The data will determine “the when,” when it comes to lifting rates, he said.
Mr. Williams spoke amid a robust rise in expectations the Fed will move rates up at its mid-December policy meeting. Last week, Fed Chairwoman Janet Yellen and New York Fed President William Dudley both said the December meeting could bring action if the economy meets the Fed’s forecast. October hiring data released Friday was particularly robust and increased market and economists’ expectations the Fed will finally be able to lift rates off the near-zero levels they’ve rested at since the end of 2008.
Many central bankers are ready to act. But some continue to worry that inflation is too low relative to the Fed’s 2% target in a climate of weakening global growth. Those officials have said they are skeptical it is time for the Fed to shift gears.
Mr. Williams said he recognized the Fed’s decision not to raise rates in late October was a “close call,” and he said he could see the arguments for raising rates and keeping them where they are now. “On one hand, the U.S. economy continues to grow and is closing in on full employment. On the other, in large part due to developments abroad, inflation has remained lower than we’d like,” he said.
But Mr. Williams said there are good reasons for the Fed to end a policy put in place to deal with an economic and financial emergency. He also said he expects the Fed to make the right policy, with higher rates serving as a “positive signal” about the outlook.