Fed’s Williams Says CB Shouldn’t Raise Rates Unexpectedly

The Federal Reserve should be communicating its views of the economy well enough that markets will not be taken by surprise by an eventual interest-rate hike, a top U.S. central banker said on Tuesday.

While it is not a problem if traders are not fully pricing in a rate increase before it happens, “it shouldn’t be the case that no one is expecting a rate increase,” San Francisco Fed President John Williams told reporters after a speech here.

The comments suggest that the Fed must do quite a bit of communicating if its officials are to feel comfortable raising rates this year, as Williams says he thinks will be appropriate.

The Fed last month held off on raising interest rates, citing concerns about global risks and low inflation.

Interest rates have been near zero for almost seven years now, and the last time the Fed raised rates was in 2006.

“We are essentially at full employment,” he said. “We have to keep an eye on where the goal posts are.”

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
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