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Fed’s Williams Says There will be No Warning Before Rate Hike

Federal Reserve Bank of San Francisco President John Williams told a television channel Monday that the U.S. central bank is unlikely to provide much warning ahead of an increase in short-term interest rates.

Instead, the official told CNBC that officials will need to go into every policy meetings with an open mind. “We should be coming together every six weeks, discussing what the outlook looks like, and what the right appropriate policy decisions at that meeting are, and adjusting policy” accordingly, Mr. Williams said. The Fed needs “to get out of this business of telegraphing our decisions in advance” and make sure that monetary policy is truly driven by and responsive to incoming economic data.

Mr. Williams said rate rises are “on the table at every meeting” but he would not suggest action is likely to happen at any particular point, although he did say a year from now he believes short-term rates will have moved up off of their current near zero levels.

“You don’t want to make a decision three months in advance and announce that decision when you really have more time to collect data and make the most informed decision you can,” Mr. Williams said.

The official also noted that he accepts that a lack of firm guidance from central bankers could generate more volatility in financial markets.

“We don’t want to be adding noise,” but at the same time, “we don’t want to be absolutely eliminating all uncertainty about our future actions. It’s healthy for the future actions to be uncertain because future conditions can change,” Mr. Williams said.

via WSJ [1]

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Alfonso Esparza

Alfonso Esparza [6]

Senior Currency Analyst at Market Pulse [7]
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza
Alfonso Esparza

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