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Recent FedSpeak Highlights

  • John Williams We can’t keep talking about policy normalization once we’re around what we think of as a neutral interest rate... So I think this forward guidance, at some point, will be past its shelf life.

    [ May 15, 2018 ]

    “That language [in the FOMC post-meeting statement] still works today,” Williams said. But as interest rates approach neutral, a point that could be reached this year or early next, “We will have to come up with something at some point...That will be a committee decision about how best to describe where money policy is positioned.”

    ...

    “We can’t keep talking about policy normalization once we’re around what we think of as a neutral interest rate... So I think this forward guidance, at some point, will be past its shelf life.”

    “I do think that the statement language will have to evolve over time, to reflect the fact that at some point, we’ve got monetary policy to more normal levels -- we can’t keep talking about policy normalization once we’re around what we think of as a neutral interest rate. And so I think this forward guidance, at some point, will be past its shelf life.”

    ...

    “Even if we.move away from verbal forward guidance in the future, we’re still going to have this numerical forward guidance [in the dot plot and the SEP].  It’s not forward guidance in the same way: it’s not like, ‘further gradual increase in interest rates’, it’d be more about: well here’s the perspective of the participants.

    And if you think about it, once we’re closer to neutral, there will be a range of views about where interest rates should go, and it won’t be quite as clear cut as it is now, where the majority of people want to see us moving toward neutral.”

    ...

    “We probably need to do more work on communicating our reaction function, and not spending so much time trying to communicate our forward guidance.”

    “Now, in a perfect world, we’d find a way to use our economic projections to come up with a document that explained this in words. Right now economic projections are kind of a statistical artifact, and there’s no story to go along with that. Hopefully at some point, we’ll be able to provide, as a committee, a nice summary of -- here’s where we see the economy going. Here are the big drivers. Here are the uncertainties. And here’s what we think appropriate policy will be. We’re not going to do that anytime soon, but this was a project we contemplated years ago, a consensus forecast or something. I still think -- if we could figure out a way to do that, and make it practical, and make it effective, that would be a good way to get into this much more data-dependent, reaction-function mode.”

  • John Williams I am personally comfortable with the fact that inflation may overshoot that 2 percent for a while.

    [ May 4, 2018 ]

    "From the beginning we've seen our inflation target being a symmetric one, where we want inflation on average to be 2 percent — sometimes above, sometimes below," he said in an interview with CNBC's Steve Liesman on "Power Lunch."

    "I am personally comfortable with the fact that inflation may overshoot that 2 percent for a while," he added.

  • John Williams The flattening of the yield curve that we’ve seen is so far a normal part of the process, as the Fed is raising interest rates, long rates have gone up somewhat -- but it’s totally normal that the yield curve gets flatter.

    [ April 17, 2018 ]

    [Williams] said a truly inverted yield curve “is a powerful signal of recessions” that historically has occurred “when the Fed is in a tightening cycle, and markets lose confidence in the economic outlook.” That is not the case now, he said.

    “The flattening of the yield curve that we’ve seen is so far a normal part of the process, as the Fed is raising interest rates, long rates have gone up somewhat -- but it’s totally normal that the yield curve gets flatter,” Williams said.

    “I don’t see the signs yet of an inverted yield curve.”

  • John Williams Our recent projections indicate that the center of the distribution of FOMC projections foresees a total of three to four rate increases this year and further gradual rate increases over the next two years, bringing the target federal funds rate to around 3-1/2 percent by the end of 2020. In my view, this is the right direction for monetary policy.

    [ April 6, 2018 ]

    The good news is for most of the past year, inflation has been running closer to 2 percent. With the economy strong, and strengthening further, I expect that we’ll see inflation reach and actually slightly exceed our longer-run 2 percent goal for the next few years.

    ...

    [O]ur recent projections indicate that the center of the distribution of FOMC projections foresees a total of three to four rate increases this year and further gradual rate increases over the next two years, bringing the target federal funds rate to around 3-1/2 percent by the end of 2020. In my view, this is the right direction for monetary policy.

    ...

    To sum up: the outlook is very positive. The economy is on course to be as strong as we have seen in many decades and inflation is moving closer to our target. The challenge for monetary policy is to keep it that way. This is never an easy task, but we are well positioned to achieve our goals, and to respond to any unexpected twists and turns that may lie in the economic road ahead.

  • John Williams From Bloomberg: “Right now it’s conjecture,” Williams said, but “my view is that other fundamentals haven’t changed in any way,” so while the neutral rate may have moved higher in response to tax cuts, it would be by a relatively small amount.

    [ February 23, 2018 ]

    “Right now it’s conjecture,” Williams said, but “my view is that other fundamentals haven’t changed in any way,” so while the neutral rate may have moved higher in response to tax cuts, it would be by a relatively small amount.

  • John Williams For the moment, I don’t see signs of an economy going into overdrive or a bubble about to burst,

    [ February 2, 2018 ]

    While the outlook is positive, it’s not so strong that it’s driving a sea change in my position. For the moment, I don’t see signs of an economy going into overdrive or a bubble about to burst, so I have not adjusted my views of appropriate monetary policy.

  • John Williams I am not really worried about throwing us off the gradual rate (increases)… It could be a little bit quicker pace of increases, somewhat quicker, but I don’t see any kind of game-changing shift in strategy.

    [ January 19, 2018 ]

    “Right now my base case is that three rate increases for 2018 seems like a good starting point.” Williams told reporters after a talk at the Bay Area Council Economic Institute, adding, “That’s not something that’s locked in.”

    “I am not really worried about throwing us off the gradual rate (increases),” he said. “It could be a little bit quicker pace of increases, somewhat quicker, but I don’t see any kind of game-changing shift in strategy.”

  • John Williams It would be a great honor to serve as vice-chairman of the Fed.

    [ January 18, 2018 ]

    John Williams, president of the Federal Reserve Bank of San Francisco, is gunning for one of the top positions in central banking, saying it would be a “great honour” to serve as number two under Jay Powell, the incoming chair.

    The regional Fed president said he would “welcome such an opportunity to contribute to the important mission of the Fed”, when asked by the Financial Times if he would be up for a move to Washington to serve as vice-chairman of the Fed’s Board of Governors.

    ...

    Mr Williams suggested the US outlook is as good as it has been for a number of years. The global economy had hit a turning point where expansion is on firmer foundations not only in the US but in Europe and elsewhere around the world, he said. That combined with some fiscal stimulus is “giving you a tailwind”, and could reduce the disinflationary pressures worldwide. 

    “All those forces provide me with greater confidence that the US economy is going to continue to grow actually somewhat above trend this year and is on a very good footing in terms of growth,” Mr Williams said. “That supports again my confidence that we will see inflation move gradually back to 2 per cent.”

    With equity markets continuing to surge, Mr Williams said one of the desirable side-effects of continuing to gradually lift rates is that higher borrowing costs could reduce some of the incentive for investors to pay excessively high prices for assets.

    “The worry you have is not about where they are today,” he said of asset prices. “Obviously we don’t want to in any way contribute to animal spirits or another kind of psychology that leads people to kind of lose track of those fundamentals and go crazy and pay whatever — speculate.”

  • John Williams Something like three rate increases next year, or two to three more increases in 2019, that seems like a reasonable view of this gradual removal of accommodation in a very benign environment.

    [ December 18, 2017 ]

    Something like three rate increases next year, or two to three more increases in 2019, that seems like a reasonable view of this gradual removal of accommodation in a very benign environment. Low unemployment, relatively low inflation - moving back to 2 percent [or] a little bit maybe above that. But it’s not an environment that I, at least right now, view as having really any big risks of either needing to tighten dramatically faster, or any real arguments not to continue on the path we’re on.

    Now, that could change. I’m sure you were going to ask - but one of the big question marks is how will the tax policies change -  what that package ends up looking like, and then obviously how that effects the economy in terms of consumer spending, business spending, and over the longer term how it affects the supply side of the economy.

    From Wall Street Journal interview published on December 5 but conducted before the blackout period.

  • John Williams I expect the unemployment rate to continue to drift downward, bottoming out at around 3¾ percent next year.

    [ November 29, 2017 ]

    I expect the unemployment rate to continue to drift downward, bottoming out at around 3¾ percent next year.

  • John Williams My own view is we want to continue this gradual pace of increase. One more rate increase in December and three more next year is a pretty good starting point.

    [ October 18, 2017 ]

    My own view is we want to continue this gradual pace of increase. One more rate increase in December and three more next year is a pretty good starting point. I am still data dependent, but that is my baseline view.

    My view is that the normal fed funds rate in the future is 2.5 percent, which is pretty low. That’s not a lot of rate increases to get to that normal level, but I do think we want to be moving gradually toward that over the next two years.

  • John Williams From Reuters:  San Francisco Federal Reserve Bank President John Williams on Wednesday said he expects the U.S. central bank to raise interest rates later this year, three times next year, and a little bit further in 2019.

    [ October 12, 2017 ]

    San Francisco Federal Reserve Bank President John Williams on Wednesday said he expects the U.S. central bank to raise interest rates later this year, three times next year, and a little bit further in 2019.

  • John Williams Turning to inflation, I feel the agony of Sisyphus.

    [ October 5, 2017 ]

    My own view is that r-star today is around 0.5 percent. Assuming inflation is running at our goal of 2 percent in the future, the typical, or normal short-term interest rate would be 2.5 percent.

    Turning to inflation, I feel the agony of Sisyphus, as core inflation rolled back down the hill after being so near to our 2 percent goal earlier in the year. This low inflation, against a background of steady growth and strong employment, has been attracting a lot of attention from Fed commentators in recent months… [However,] as [temporary] effects wane and the strong economy pushes inflation higher for prices that tend to be sensitive to the economy, I am optimistic that inflation will move up to our 2 percent goal over the next couple of years. As inflation rises and the economic expansion continues, we will be able to move interest rates up to their new normal level.

  • John Williams My own view is that [low inflation] has not been that baffling.

    [ September 22, 2017 ]

    "My own view is that it has been not that baffling," Mr. Williams said, referring to low inflation. He noted that prices in some sectors such as health care and cellular services have been hit by downward movements, and that prices typically reflecting developments in the economy have been rising.

    "With a strong economy, history teaches us that inflation tends to move up," he said.

    Assuming the U.S. remains on a path of rising inflation and modest economic growth -- Mr. Williams expects 2.5% gross domestic product growth this year and slightly less than 2% in 2018 -- the Fed should be able to raise interest rates gradually toward what he sees as the "normal" longer-term policy rate of about 2.5%.

    That could include another rate increase this year and around three in 2018, he said, which is in line with projections released Wednesday by the Fed.

  • John Williams My own view is that it will be appropriate to start [the balance sheet reduction] process this fall.

    [ August 2, 2017 ]
  • John Williams I want [balance sheet reduction] to be predictable, well understood, gradual -- not super gradual, or uber-gradual, but gradual over time -- but also to be fundamentally on autopilot.

    [ May 26, 2017 ]

    I want [balance sheet reduction] to be predictable, well understood, gradual -- not super gradual, or uber-gradual, but gradual over time -- but also to be fundamentally on autopilot.

  • John Williams I think [balance sheet] normalization will start later this year.

    [ March 30, 2017 ]

    [The challenge for the FOMC] is really trying to get that normalization process [started] both in terms of interest rates, but also our balance sheet, which I think that normalization will start later this year, getting that process underway.

  • John Williams As we move forward, I see the unemployment rate nudging down a bit further, ultimately bottoming out near 4½ percent by the end of the year.

    [ March 29, 2017 ]

    As we move forward, I see the unemployment rate nudging down a bit further, ultimately bottoming out near 4½ percent by the end of the year.

  • John Williams Three or even four increases as your total makes sense.

    [ March 23, 2017 ]

    “I think the economy is in a good place right now. Growth has been basically a little bit above trend,” Mr. Williams told The Wall Street Journal during an interview.

    “Three or even four increases as your total makes sense,” he said.

    He said his projections are “not conditional on something happening,” such as whether new government policies stimulate faster growth, but rather on the state of the economy.

    He added, however, that if new fiscal policies do spur growth, that would strengthen the argument for four rather than three moves this year.

    Mr. Williams said he didn’t know when the next rate increases might occur, but added, “Doing them earlier positions monetary policy that if we do get either very positive news on the economy in terms of data or maybe news of significant fiscal stimulus, then you’re positioned to move a little bit quicker.”

  • John Williams From a risk management point of view, there’s an argument to move sooner, rather than wait...  Honestly, I think there’s a lot of potential that this economy is going to perhaps get more of a boost than the [three rate-hike] base case.

    [ February 3, 2017 ]

    The Federal Reserve shouldn't be "too timid" or "delay too long" to raise interest rates, said San Francisco Fed President John Williams on Friday. In an interview on Bloomberg TV, Williams challenged the Wall Street view that a rate hike in March is now off the table given the January jobs report. "I don't agree. All our meetings are live," he said. He also disagreed the Fed needed to wait to see details of Trump's fiscal policy legislation before raising rates. "This economy is proving it can grow at a steady rate without as much monetary stimulus as we've been giving," he said. "We actually can make decisions based on that without knowing what happens in terms of fiscal policy later in the year."

    -------

    “From a risk management point of view, there’s an argument to move sooner, rather than wait,” he said in an interview Friday at the Bloomberg News office in San Francisco.

    “There’s some optionality to moving sooner rather than waiting this year,” he said. “Three rate increases, like I said, it’s a reasonable guess, a reasonable perspective to have as a base case. But honestly, I think there’s a lot of potential that this economy is going to perhaps get more of a boost than the base case.”

    He also noted that there could be arguments for “caution” that would support holding off in March and waiting to collect more information.

  • John Williams Right now, my view is a lot of the fiscal stimulus people have been talking about would have a relatively modest effect.

    [ January 6, 2017 ]

    WILLIAMS: More fiscal stimulus, I think, will have a modest effect on economic growth over the next couple of years.

    CNBC: Can you give us kind of the ranges around which we mean growth? I mean, there's numbers thrown out that growth could accelerate to 3%, 4%, 5%, but my guess is you think the natural growth rate of the economy is below 2%?

    WILLIAMS: Right. So my view in terms of the demographic and productivity trend we've been seeing for the last decade or so is growth is likely to be 1.5% to 1.75%. Now, some policies could change that if we find ways to do a lot more to invest in people and technology. More broadly in infrastructure. I think we can shift that upwards. Right now, my view is a lot of the fiscal stimulus people have been talking about would have a relatively modest effect.

    CNBC: When you say shift upwards, are you looking for an extra half point, extra point? What kind of numbers can an economy do of this size? Can we add two percentage points of growth?

    WILLIAMS: I think when you look back at history, and the periods where we have had very rapid productivity growth that would give us an extra two points of growth, that's periods of groundbreaking changes and technology and how the economy works. That could happen in the future. I don't have a crystal ball about that, but you're talking about transformative change to the economy.

  • John Williams The central tendency of the views of my colleagues is around three rate hikes. That's a pretty reasonable assumption.

    [ January 5, 2017 ]

    Clearly, if a number of countries have trade barriers, that would have a negative impact on growth and it would also raise inflation, too. So I mean, there's are a lot of factors that can come out of various policy actions, and, again, from my perspective we just try to analyze them all and what it means for the economy.

    ...

    My own view is it's very hard to know what fiscal policy will be over the next couple of years, but the way I viewed it was relative to a few months ago, I think the distribution of likely outcome in terms of fiscal policy is more stimulus that I was thinking a few months ago and I built that into my own forecast.

    ...

    I will say that i think that that's -- you know, the central tendency of the views of my colleagues is around three rate hikes. That's a reasonable view given unemployment is 4.6%, economy's growing at 2% and inflation going back to 2%. That's a pretty reasonable assumption.

  • John Williams I will say that my underlying view for next year is broadly consistent with the central tendency of the committee.

    [ December 20, 2016 ]

    Q: But surely the pace of future rate hikes will depend in part on fiscal policy?

    A: The thing about conducting monetary policy in this time, it’s really important to reiterate that we’re focused on our maximum employment and price stability goals. There are decisions that are made by the elected representatives in Congress and the administration, and that’s the process that should happen. What we need to do and what we will do is focus on any changes in the economic outlook, what does that mean for achieving our goals and for the right path of policy decisions to achieve those goals. I know everyone likes to talk about fiscal policy in terms of what does it mean for the outlook. In the last couple of years we’ve also had some big shocks to the economy that came from across the globe. There’s a lot of things that can change and we have to stay focused on our goals and continue to be data dependent in terms of analyzing what do these changes mean for our outlook.

    ...

    I will say that my underlying view for next year is broadly consistent with the central tendency of the committee. My view is that the economy is going to grow roughly as it did this year, unemployment is going to edge down a little bit, inflation moving back to 2 percent, and that calls for gradual removal of policy accommodation.

    ...

    Obviously I don’t have any particular insights into what the new Congress or the new administration is going to do around fiscal policy. There’s a lot of uncertainty about what policies are going to be enacted, and that matters a lot in terms of thinking about any effects on the economy. I do think, even though I’m definitely “wait and see” in terms of learning what happens, the main effect on my outlook is that my view on the risks to the outlook have shifted a little. Those risks used to be maybe balanced and if anything a little bit to the soft side because of global developments and other factors that might cause growth to weaken. And I think that the possibility of greater fiscal stimulus and other changes in policies would if anything move those risks a little bit to the right. But it’s not a big effect.

  • John Williams Stop thinking about this as a national issue. It’s really a global phenomenon driven by demographic trends and what economists call the global savings glut or heightened demand for safe assets.

    [ December 20, 2016 ]

    Q:  In an essay this summer, you argued that the Fed should be preparing for future crises. You suggested in particular that the Fed should consider targeting a higher inflation rate. Is that discussion happening?

    A:  There is definitely work going on in the economics community around these topics, among a lot of academics but also among central banks. Particular kudos to the Bank of Canada, who, through a process that the bank has with the government — every five years they review their framework for monetary policy – they have a very serious deep dive and thoughtful consideration of these issues. I think of them as conducting best practice in terms of the willingness to consider these issues and to think long term and to do it in a very open-minded way. So I think other central banks should follow the Bank of Canada’s lead here.

    I think the important thing to remember on this is that this is not an issue about the U.S. or Canada. It’s an issue that according to our research and an increasing number of researchers, this observation that the equilibrium interest rate appears to be at very low level and is likely to stay that way for a long time is more of a global phenomenon. The one piece of advice I give on this is: Stop thinking about this as a national issue. It’s really a global phenomenon driven by demographic trends and what economists call the global savings glut or heightened demand for safe assets. I think people around the world are starting to focus on this. The question of what’s the right remedy, that’s kind of the later discussion.

    Q:  If it’s a global issue, does it require a coordinated response?

    A:  If people came to the conclusion that given the equilibrium real rate [inflation targets should be increased], I do think there would be advantages: that the more countries that raised their target at the same time, I think the greater the benefit is...  When everybody is at the zero lower bound and they’re all being constrained, there’s a negative feedback loop.... And with a very low inflation target around the world, the likelihood of all of us hitting the zero lower bound is higher. And if everyone had a higher inflation target — a modestly higher target, a 3 or 4 percent target — then the likelihood of all us getting to the zero lower bound at the same time is much lower. My punch line is: Yes, countries can do it one by one. That would work. We’ve seen it happen. But I do think there are some benefits to a more, I wouldn’t say coordinated, but perhaps a more correlated approach.

  • John Williams "We do want to run a hot economy for a while (but) we don’t want it to be too hot for too long."

    [ November 9, 2016 ]

    "It makes sense, I would say, to ease off on the gas a bit," Williams said. "We do want to run a hot economy for a while (but) we don’t want it to be too hot for too long."

  • John Williams If things continue to do as I expect with core inflation moving up further next year and overall inflation moving up further next year, getting closer and closer, inching, you know, into the 2 percent, up to the 2 percent range, and my view that unemployment will be around moving down to, you know, below 4¾ percent or something like that, I think we do need to keep moving on raising interest rates and faster than one increase a year.

    [ October 25, 2016 ]

    WSJ: Are you ready to say how you feel things might play out in 2017 in terms of—I’m not trying to necessarily lock you down to say, like, how many, but, you know, just your sense of how do you think monetary policy might play out or how you’d like it to play out in 2017?

    WILLIAMS: Well, I think that, you know, if things continue to do as I expect with core inflation moving up further next year and overall inflation moving up further next year, getting closer and closer, inching, you know, into the 2 percent, up to the 2 percent range, and my view that unemployment will be around moving down to, you know, below 4¾ percent or something like that, I think we do need to keep moving on raising interest rates and faster than one increase a year.

    But again, we don’t have to raise them more than a very gradual pace.

  • John Williams Williams said that he will be “definitely not losing sleep” if the Fed overshoots its inflation target, and that it’s “absolutely essential that we demonstrate that we can hit this 2 percent inflation goal.”

    [ October 21, 2016 ]

    Williams said that he will be “definitely not losing sleep” if the Fed overshoots its inflation target, and that it’s “absolutely essential that we demonstrate that we can hit this 2 percent inflation goal.”

  • John Williams In the context of a strong economy with good momentum, it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later. Let me be clear: In arguing for an increase in interest rates, I’m not trying to stall the economic expansion. It’s just the opposite: My aim is to keep it on a sound footing so it can be sustained for a long time.

    [ September 6, 2016 ]

    In the context of a strong economy with good momentum, it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later. Let me be clear: In arguing for an increase in interest rates, I’m not trying to stall the economic expansion. It’s just the opposite: My aim is to keep it on a sound footing so it can be sustained for a long time.

    History teaches us that an economy that runs too hot for too long can generate imbalances, potentially leading to excessive inflation, asset market bubbles, and ultimately economic correction and recession. A gradual process of raising rates reduces the risks of such an outcome. It also allows a smoother, more calibrated process of normalization that gives us space to adjust our responses to any surprise changes in economic conditions. If we wait too long to remove monetary accommodation, we hazard allowing imbalances to grow, requiring us to play catch-up, and not leaving much room to maneuver. Not to mention, a sudden reversal of policy could be disruptive and slow the economy in unintended ways.

  • John Williams The fact is we won’t need as much job growth going forward. We’re pretty much at full employment now, so the future is less about meeting a goal and more about maintaining a result.

    [ August 18, 2016 ]

    I should know better by now, but even if I change the channels for an hour or two, I’m constantly surprised by the commentary that seems to miss the larger playing field. In a robust labor market, we simply don’t need to create as many jobs as we did when we were trying to climb out of the hole dug for us by the recession. Over the past few years, we’ve seen outstanding numbers—in 2014 and 2015 the economy added nearly 3 million jobs a year, and 2016 is on track to deliver about another 2¼ million jobs.

    That’s great news, but the fact is we won’t need as much job growth going forward. We’re pretty much at full employment now, so the future is less about meeting a goal and more about maintaining a result. That means creating enough new jobs to keep up with the increase in the size of the labor force.

  • John Williams If we wait until we see the whites of inflation’s eyes, we don’t just risk having to slam on the monetary policy brakes, we risk having to throw the economy into reverse to undo the damage of overshooting the mark. And that creates its own risks of a hard landing or even a recession.

    [ August 18, 2016 ]

    In the context of a strong domestic economy with good momentum, it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later. I have a few reasons for saying that.

    First, Milton Friedman famously taught us that monetary policy has long and variable lags. Research shows it takes at least a year or two for it to have its full effect... If we wait until we see the whites of inflation’s eyes, we don’t just risk having to slam on the monetary policy brakes, we risk having to throw the economy into reverse to undo the damage of overshooting the mark. And that creates its own risks of a hard landing or even a recession.

    Second, experience shows that an economy that runs too hot for too long can generate imbalances, ultimately leading to either excessive inflation or an economic correction and recession. In the 1960s and 1970s, it was runaway inflation. In the late 1990s, the expansion became increasingly fueled by euphoria over the “new economy,” the dot-com bubble, and massive overinvestment in tech-related industries. And in the first half of the 2000s, irrational exuberance over housing sent prices spiraling far beyond fundamentals and led to massive overbuilding. If we wait too long to remove monetary accommodation, we hazard allowing these imbalances to grow, at great cost to our economy.

  • John Williams I’m definitely not one of those who thinks we should wait until we see inflation get to 2 percent before we raise rates. I think that would put us significantly behind the curve.

    [ August 11, 2016 ]

    WP: How does [your economic outlook] translate into the appropriate path for monetary policy?

    WILLIAMS: Based on where we are relative to goals, we still need to be accommodative. I still want to see the good, strong labor market continue. I still want to see inflation moving back up to 2 percent. I do want to see monetary policy still having the foot on the gas, not on the brakes.

    But we need to continue to execute on the basic strategy that we’ve laid out over the past couple of years, and that’s a gradual path of removing accommodation, taking our foot very gradually off the gas. We’re not getting anywhere close to the brakes here, and I think we can do that in an orderly, systematic way based on the flow of data.

    WP: So, just cutting to the chase here, does that gradual path of rate increases include any this year, in your view?

    WILLIAMS: In my view, it does. We’ve been adding enormous policy accommodation over the past several years. As the economy gets closer to its goals, we can again pull our foot off the gas a bit and hopefully execute a nice, soft landing over the next couple of years.
    ...
    We want to continue with a gradual path of increases. I don’t think that would interfere in any way with our growth continuing. That would not in any way stall the economy. I just think that would be consistent with the positive developments we’ve seen.

    In terms of my own view of whether a rate hike makes sense at the upcoming meetings, it would really be based on how are we doing on our dual mandate goals. I don’t necessarily need to see signs that the labor market is continuing to roar ahead and unemployment continuing to plummet. I just need to see a labor market that is at, or even better than, a normal measure of full employment. On the inflation data, I’m just looking for confirmation that the data are continuing to show the inflationary trends are consistent with the outlook that I’ve written down.

    I’m definitely not one of those who thinks we should wait until we see inflation get to 2 percent before we raise rates. I think that would put us significantly behind the curve. People say, "What are you worried about? Why not raise rates then?" I think then we would have to raise rates relatively quickly, and I think that abrupt shift in policy could be disruptive.

  • John Williams “There’s definitely a data stream that could come through in the next couple of months that I think would be supportive of two rate increases.”

    [ July 29, 2016 ]

    “There’s definitely a data stream that could come through in the next couple of months that I think would be supportive of two rate increases,” Williams told reporters Friday after speaking in Cambridge, Massachusetts. “There’s data that we could get that wouldn’t be supportive of that -- it could be one, maybe, or none. Time will tell.”
    ...
    “It makes sense to continue on the process of the gradual removal of accommodation -- my personal view is it makes sense, assuming the data will support that, to raise rates again this year, but it is data-dependent,” Williams said. “We’ll get a couple more employment reports, more data on inflation before our next meeting.”

  • John Williams “Being cautious forever would just lead us to need to raise rates much more aggressively in the future, and I think that could have some potentially negative consequences.”

    [ July 5, 2016 ]

    Williams said U.S. monetary policy is currently cautious, and if growth persists despite global risks, that stance needs to change.

    “If the data come in strong, or come in consistent with my outlook, that would argue to step away somewhat from that more cautious approach,” Williams said. “Being cautious forever would just lead us to need to raise rates much more aggressively in the future, and I think that could have some potentially negative consequences.”

  • John Williams It’s going to take at least six years to get the balance sheet back to normal, which is in keeping with the overall approach of removing accommodation gradually.

    [ May 13, 2016 ]

    One other issue that has been getting some attention is what we’re planning on doing with our sizable balance sheet, which swelled to some $4 trillion after three rounds of quantitative easing. We have a ways to go before we start to unwind it, and it won’t happen until normalization of the funds rate is well under way. After that, our plan is to shrink the balance sheet “organically,” if you will, through the maturation of the assets. It’s going to take at least six years to get the balance sheet back to normal, which is in keeping with the overall approach of removing accommodation gradually.

  • John Williams "It's not about tightening policy so much as pulling back a little bit" on monetary accommodation, Williams said.

    [ May 3, 2016 ]

    "It's not about tightening policy so much as pulling back a little bit" on monetary accommodation, Williams said.

  • John Williams With the economy strong, and strengthening further, I expect that we’ll see inflation reach and actually slightly exceed our longer-run 2 percent goal for the next few years.

    [ April 6, 2016 ]

    The good news is for most of the past year, inflation has been running closer to 2 percent.  With the economy strong, and strengthening further, I expect that we’ll see inflation reach and actually slightly exceed our longer-run 2 percent goal for the next few years.

    ...

    In particular, our recent projections indicate that the center of the distribution of FOMC projections foresees a total of three to four rate increases this year and further gradual rate increases over the next two years, bringing the target federal funds rate to around 3-1/2 percent by the end of 2020. In my view, this is the right direction for monetary policy.

    ...

    To sum up: the outlook is very positive. The economy is on course to be as strong as we have seen in many decades and inflation is moving closer to our target. The challenge for monetary policy is to keep it that way. This is never an easy task, but we are well positioned to achieve our goals, and to respond to any unexpected twists and turns that may lie in the economic road ahead.

  • John Williams I don’t want to evince a stereotypical American overoptimism—and as a native Californian, I will admit to being an optimist in general—but I don’t see a looming global crisis.

    [ March 29, 2016 ]

    There are factors slowing global growth, and they’re very real. But to some extent, the attention has distorted their size and scope, and it’s important to separate the facts from the chatter. The data don’t show that the song is over. Europe may be under something of a gray cloud, but the death of European growth, to paraphrase Mark Twain, is greatly exaggerated. I don’t want to evince a stereotypical American overoptimism—and as a native Californian, I will admit to being an optimist in general—but I don’t see a looming global crisis. Growth expectations may be slightly tempered, but that’s a far cry from the triage bay we were in eight years ago. My view is essentially, let’s just stay on track. Let’s not get sidelined by the noise and distraction commentary can sometimes cause.

  • John Williams The data to me isn't so much about the labor market continuing to improve, I'm very positive on that, it's more about inflation moving back to 2 percent in the context of very strong headwinds

    [ March 25, 2016 ]

    "We've been missing our 2 percent inflation goal for three and a half years or so, global disinflationary factors are still holding inflation down...The data to me isn't so much about the labor market continuing to improve, I'm very positive on that, it's more about inflation moving back to 2 percent in the context of very strong headwinds," he explained, citing the strong dollar and low commodity prices.

  • John Williams We are always on the verge of collapse; I just don’t think it is supported by the data

    [ March 2, 2016 ]

    Mr. Williams does not vote on rates this year, but he is a key player in the debate. He argued that worries about an impending recession or financial crash circulating in Wall Street were misguided, in much the same way that economists had been wrongly convinced back in 2006 on the eve of the subprime implosion that the US economy was robust.

    He said the story today had become that the US was “hyper-fragile” or that it faced a period of so-called secular stagnation, as argued by Larry Summers, formerly US Treasury secretary. “We are always on the verge of collapse; I just don’t think it is supported by the data,” Mr. Williams said.

  • John Williams Compared to the gentle taps of the hammer of previous FOMC verbal guidance that appeared to have little effect on expectations, the time-based guidance was like a sledgehammer.

    [ February 26, 2016 ]

    Any discussion about the costs and benefits of forward guidance must take place in the context of the situation in which it is being used. This brings me to my first case study, the Fed’s use of explicit time-based guidance starting on August 9, 2011. Despite extraordinary monetary stimulus—over 2½ years of near-zero short-term interest rates and QE1 and QE2—the unemployment rate had come down only 1 percentage point from its recession peak, to 9 percent, and the economic recovery remained tepid. Given the weakness in the economy, the FOMC repeatedly stated that it intended to keep rates exceptionally low “for an extended period.” Nonetheless, public expectations were glued to the idea that the Fed would start to raise rates in about a year.

    It was against that backdrop that the FOMC decided to take dramatic action to shift public expectations using time-based forward guidance. The August 2011 FOMC statement said “The Committee currently anticipates that economic conditions—including low rates of resource utilization and a subdued outlook for inflation over the medium run—are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.” Three comments are in order. First, this statement, as well as subsequent FOMC statements that used forward guidance, clearly put the economic outlook front and center as the determinant of policy. The outlook defines the guidance. Second, it was the lower bound that tied the hands of policymakers, not the introduction of date-based guidance. Third, this action was taken after weighing the concerns around the costs of time-based guidance discussed in Feroli et al. (2016); the conclusion then was that the benefits from stimulating the economy outweighed the potential cost.

    The evidence bears out this judgment. The issuance of the statement dramatically shifted public expectations of future Fed policy. This is seen in private economists’ forecasts of the length of time until the Fed would raise rates, which jumped following the statement. Compared to the gentle taps of the hammer of previous FOMC verbal guidance that appeared to have little effect on expectations, the time-based guidance was like a sledgehammer.

  • John Williams So why don’t we just abandon these simple rules and embrace optimal control? The answer is that, for all our intellect—and I’ll admit, economists are very sure their collective intellect is almost too much for the world to handle—there’s a limit to how much we truly know about the future.

    [ February 25, 2016 ]

    So why don’t we just abandon these simple rules and embrace optimal control?

    The answer is that, for all our intellect—and I’ll admit, economists are very sure their collective intellect is almost too much for the world to handle—there’s a limit to how much we truly know about the future. We have forecasts, which are based on sound data and analysis. But they’re only forecasts, and the unexpected can always erupt. I don’t have a 100 percent degree of certainty where housing prices are going. I don’t know for sure what’s going to happen with China. I wouldn’t bet my life on what the ECB or Bank of Japan is going to do. We may think we have it all figured out, but sometimes economists’ track records leave something to be desired. So there is a risk with the optimal control approach that we’ll believe our theories and our models too much, and that can lead us astray. There is a need for humility and to recognize our limitations.

  • John Williams In my view, inflation somewhat above 2 percent is just as bad as the same amount below.

    [ February 18, 2016 ]

    I’d also like to stress the “above or below” part. Many people think that Fed policymakers’ concern lies disproportionately with inflation that’s too high. They think we view inflation lower than 2 percent as sort of “not great,” but see inflation above 2 percent as catastrophic. That’s not the case. In my view, inflation somewhat above 2 percent is just as bad as the same amount below.

  • John Williams At the risk of puncturing some of the more colorful theories about what drives the Fed, I lay before you the cold, hard truth: Fed policymakers are even more boring than you think. Because all we see is our mandate.

    [ February 18, 2016 ]

    Of course, I am aware of, and closely monitoring, potential risks. But I want to be clear what that means. It’s often said that the economy isn’t the stock market and the stock market isn’t the economy. That’s very true. Short-term fluctuations or even daily dives aren’t accurate reflections of the state of the vast, intricate, multilayered U.S. economy. And they shouldn’t be viewed as the four horsemen of the apocalypse. Remember, the expansion of the 1980s wasn’t derailed by the crash of ’87, and we sailed through the Asian financial crisis a decade later. I say “remember”—some of you here will actually remember and others will remember it from your high school history class.

    From a policymaker’s perspective, my concern isn’t as simple as whether markets are up or down. Watching a stock ticker isn’t the way to gauge America’s economic health. As Paul Samuelson famously said, the stock market has predicted nine out of the past five recessions. What’s important is how it impacts jobs and inflation in the U.S.

    At the risk of puncturing some of the more colorful theories about what drives the Fed, I lay before you the cold, hard truth: Fed policymakers are even more boring than you think. Because all we see is our mandate. How does this affect American jobs and growth? What does this mean for households’ buying power?

  • John Williams We have a strong domestic economy and we can basically offset [the current global weakness]. If it weren’t for these headwinds, the economy would easily be growing at 3 percent a year.

    [ January 29, 2016 ]

    “Global growth has slowed” and China’s economy is moving to a slower pace, he said in a panel discussion in San Francisco. “We have a strong domestic economy and we can basically offset that. If it weren’t for these headwinds, the economy would easily be growing at 3 percent a year.”

  • John Williams If you were to ask me what keeps me up at night, or what are the shocks that could cause a recession, I would say almost all of them are outside the U.S. borders.

    [ January 15, 2016 ]

    “If you were to ask me what keeps me up at night, or what are the shocks that could cause a recession, I would say almost all of them are outside the U.S. borders,” Williams said Friday on a panel discussion in San Francisco. “I’m actually feeling a little bit more positive around Europe,” he said, but “China’s the wild card.”

  • John Williams It’s likely going to take at least six years to get the balance sheet back to normal, which is in keeping with the overall approach to removing accommodation gradually.

    [ January 8, 2016 ]

    We have made clear in our communication—and let me reiterate—that we still have a ways to go before we start to unwind it. For the time being, we’re maintaining its size through reinvestment, so that the first steps in removing monetary accommodation occur slowly and gradually, via the funds rate only. This will continue until normalization of the funds rate is well under way. After that, our plan is to shrink the balance sheet “organically,” if you will, through the maturation of the assets. It’s likely going to take at least six years to get the balance sheet back to normal, which is in keeping with the overall approach to removing accommodation gradually.

  • John Williams You know, I think something in that 3 to 5 rate hike range makes sense, at least at this time. But we're data dependent. We continue to be data dependent so the data's suggesting that gradual pace of rate hikes makes sense.

    [ January 4, 2016 ]

    Liesman: So let's talk about the path for fed rate hikes this year. The median seems to suggest four this year. Is that also your forecast?

    Williams: Well, I think that given the forecast they have for where the economy's going, what's happening with inflation – and inflation is the one thing that we're still struggling to get back to our 2% goal. That to me is the main focus. You know, I think something in that 3 to 5 rate hike range makes sense, at least at this time. But we're data dependent. We continue to be data dependent so the data's suggesting that gradual pace of rate hikes makes sense. But we'll have to re-evaluate that, reassess that, based on where we see inflation and other indicators that kind of are factors in inflation and how we see economic growth over the next year.

  • John Williams My preference for a more gradual process also reflects that the economy, for all its progress, still needs some accommodation. We don’t need the extraordinarily accommodative policy that has characterized the past several years, but the headwinds we’re facing—the risks from abroad, for instance, and their impact on the dollar—call for a continued push. Not with a bulldozer, but a steady nudge.

    [ December 2, 2015 ]

    My preference is sooner rather than later for a few reasons.

    First, Milton Friedman famously taught us that monetary policy has long and variable lags.Research shows it takes at least a year or two for it to have its full effect.So the decisions we make today must take aim at where we’re going, not where we are. The economy is a moving target, and waiting until we see the whites of inflation’s eyes risks overshooting the mark.

    Second, experience shows that an economy that runs too hot for too long can generate imbalances, ultimately leading to either excessive inflation or an economic correction and recession. In the 1960s and 1970s, it was runaway inflation. In the late 1990s, the expansion became increasingly fueled by euphoria over the “new economy,” the dot-com bubble, and massive overinvestment in tech-related industries. And in the first half of the 2000s, irrational exuberance over housing sent prices spiraling far beyond fundamentals and led to massive overbuilding. If we wait too long to remove monetary accommodation, we hazard allowing these imbalances to grow, at great cost to our economy.

    Finally, an earlier start to raising rates would allow a smoother, more gradual process of normalization. This gives us space to fine-tune our responses to any surprise changes in economic conditions. If we wait too long to raise rates, the need to play catch-up wouldn’t leave much room for maneuver. Not to mention, it could roil financial markets and slow the economy in unintended ways.

    My preference for a more gradual process also reflects that the economy, for all its progress, still needs some accommodation. We don’t need the extraordinarily accommodative policy that has characterized the past several years, but the headwinds we’re facing—the risks from abroad, for instance, and their impact on the dollar—call for a continued push. Not with a bulldozer, but a steady nudge.

  • John Williams The public or market perceptions were that we had completely moved off 2015, and I don’t think that was accurate.

    [ November 7, 2015 ]

    The public or market perceptions were that we had completely moved off 2015, and I don’t think that was accurate. I think we’re okay now, but I think this is hard. This is going to continue to be hard. Everybody wants clarity.

  • John Williams There are risks, as there always are in life. And there’s always the possibility of what British Prime Minister Harold Macmillan said when asked what worried him most: “Events, dear boy, events.” But all in all, things are looking up, and if they stay on track, I see this as the year we start the process of monetary policy normalization.

    [ October 6, 2015 ]

    There are risks, as there always are in life. And there’s always the possibility of what British Prime Minister Harold Macmillan said when asked what worried him most: “Events, dear boy, events.” But all in all, things are looking up, and if they stay on track, I see this as the year we start the process of monetary policy normalization.

  • John Williams I am starting to see signs of imbalances emerge in the form of high asset prices, especially in real estate, and that trips the alert system.

    [ September 28, 2015 ]

    I am starting to see signs of imbalances emerge in the form of high asset prices, especially in real estate, and that trips the alert system. One lesson I have taken from past episodes is that, once the imbalances have grown large, the options to deal with them are limited. I think back to the mid-2000s, when we faced the question of whether the Fed should raise rates and risk pricking the bubble or let things run full steam ahead and deal with the consequences later. What stayed with me were not the relative merits of either case, but the fact that by then, with the housing boom in full swing, it was already too late to avoid bad outcomes. Stopping the fallout would’ve required acting much earlier, when the problems were still manageable. I’m not assigning blame by any means, and economic hindsight is always 20/20. But I am conscious that today, the house price-to-rent ratio is where it was in 2003, and house prices are rapidly rising. I don’t think we’re at a tipping point yet—but I am looking at the path we’re on and looking out for potential potholes.

  • John Williams The big headline is that the Federal Open Market Committee decided to hold off on raising interest rates this week. It was a close call in my mind, in part reflecting the conflicting signals we’re getting.

    [ September 19, 2015 ]

    The big headline is that the Federal Open Market Committee decided to hold off on raising interest rates this week. It was a close call in my mind, in part reflecting the conflicting signals we’re getting. The U.S. economy continues to strengthen while global developments pose downside risks to fully achieving our goals.

  • John Williams Williams said that the September meeting “would be a very plausible time” to start raising interest rates.

    [ July 15, 2015 ]

    “I still believe this will be the year for liftoff, and I still believe that waiting too long to raise rates poses its own risks,” Mr. Williams said.

    “I can’t tell you the date of liftoff,” Mr. Williams said in reference to when Fed officials might boost rates off of their current near-zero levels. That said, “I see growth on a solid trajectory, full employment just in front of us, wages on the rise, and inflation gradually moving back up to meet our goal” of a 2% rise, he said.

    Williams said that the September meeting “would be a very plausible time” to start raising interest rates.

  • John Williams I still believe this will be the year for liftoff, and I still believe that waiting too long to raise rates poses its own risks.

    [ July 8, 2015 ]

    I still believe this will be the year for liftoff, and I still believe that waiting too long to raise rates poses its own risks. I know not everyone agrees and there are those who believe we should wait until we’re nipping at the heels of 2 percent. My reasons for advocating a rise before that happens remain the same. Monetary policy has long and variable lags, as Milton Friedman famously taught us. Specifically, research shows it takes at least a year or two to have its full effect. We’re therefore dealing with my favorite analogy: The car speeding towards a red light. If you don’t ease up on the gas, you’ll have to slam on the brakes, possibly even skidding into the intersection. Waiting until we’re close enough to dance with 2 percent means running the very real risk of having to dramatically raise rates to reverse course, which could destabilize markets and potentially derail the recovery. I see a safer course in starting sooner and proceeding more gradually.

  • John Williams Definitely my own forecast would be having us raise rates two times this year, but that would depend on the data.

    [ June 19, 2015 ]

    “Definitely my own forecast would be having us raise rates two times this year, but that would depend on the data," San Francisco Fed President John Williams told reporters at the bank's headquarters.

    "I still believe this will be the year for liftoff, and I still believe that waiting too long to raise rates poses its own risks," Williams said in a speech earlier. "I see a safer course in starting sooner and proceeding more gradually."

  • John Williams its very likely we would start raising interest rates even with inflation below 2%

    [ February 25, 2015 ]

    We are coming at this from a position of strength, Mr. Williams said. As we collect more data through this spring, as we get to June or later, I think in my own view well be coming closer to saying there are a constellation of factors in place to make a call on rate increases, he said.

    I dont see any reason at all that we should raise rates before June. Thats out, he said. Maybe in June it would be the time to contemplate raising rates. Maybe well want to wait longer, but at least it will be an option to decide on, he said. The Fed has a scheduled policy meeting June 16-17.

    Mr. Williams said he would like the Fed to drop its commitment to be patient in deciding when to raise rates because it limits the central banks options on when to move. You would want to remove the patient language only to have the ability to make those data-dependent decisions later in the year, he said.
    ...
    Mr. Williamss confidence about the monetary policy outlook is rooted in what he sees as labor market strength. He believes weak inflation, which has undershot the central banks 2% target for more than two years, will rise to its desired level by the end of 2016.

    He also said falling short on the inflation target wont necessarily stay the Feds hand on rate increases. Because Fed rate actions have to take account of their effect over the long run, its very likely we would start raising interest rates even with inflation below 2%, he said.

    Mr. Williams said it is likely that the Fed will see a hot labor market that should in turn produce the wage pressures that will drive inflation back up to desired levels. He said much of the weakness seen now in price pressures is due to the sharp drop in oil prices, which he said isnt likely to last.

    The cosmological constant is that if you heat up the labor market, get the unemployment rate down to 5% or below, thats going to create pressures in the labor market causing wages to rise, he said.

    Mr. Williams said there is a disconnect between Fed officials and markets expectations for the path of short-term rates. He said he hopes that can be bridged by effective communication explaining central bank policy choices.

    I have no desire to raise rates just to raise rates. Im not worried about financial stability, personally. Im not worried about risks of low interest rates on their own. I am focused on the very pedestrian issue of achieving the Feds employment and inflation goals, and will make policy with those factors in mind, Mr. Williams said.

    He said that when the Fed does raise rates, he would prefer a gradual path, but he doesnt expect it to replay the series of steady, small rate increases seen a decade ago. He said he could see the Fed taking whatever action is needed at a given meeting, rather than putting rates on a steady upward path.

  • John Williams Right now it's January. What we will do in June, September or whatever, later in the year, will really depend on what's happening in the economy, what's happening globally, in terms of our goals

    [ January 16, 2015 ]

    "I think that sometime around the middle of the year we are going to be closer to a decision, at least I would think we would be closer to it being an appropriate timing to raise rates," San Francisco Fed President John Williams said at a meeting of the Bay Area Economic Institute.
    ...
    "It's going to be a very interesting year in terms of global events, so I'm going to watch the data, and decisions will be based on what actually happens, not just on what our forecasts are," Williams said.
    ...
    The Federal Reserve's decision on when to raise interest rates will be driven by economic data, a top Fed official said on Friday, shortly after expressing his own view that mid-year would be an appropriate time to consider a rate rise.

    "Right now it's January. What we will do in June, September or whatever, later in the year, will really depend on what's happening in the economy, what's happening globally, in terms of our goals," San Francisco Fed President John Williams said at a Bay Area Council Economic Institute event. "I do not prejudge what that decision will be until we actually have those debates and discussions."

  • John Williams I would expect by June that the argument pro and con for lifting off rates will be probably a close call

    [ January 12, 2015 ]

    Federal Reserve Bank of San Francisco President John Williams, who will vote on policy this year, said raising interest rates in June would be a close call amid strong momentum in the labor market and weaker wage gains.

    I would expect by June that the argument pro and con for lifting off rates will be probably a close call assuming that inflation doesnt fall further, Williams said today in a telephone interview from his San Francisco office. Its a reasonable guess.
    ...

  • John Williams An initial rate increase coming in mid-2015 would be a reasonable guess, Federal Reserve Bank of San Francisco President John Williams said Monday.

    [ December 5, 2014 ]

    An initial rate increase coming in mid-2015 would be a reasonable guess, Federal Reserve Bank of San Francisco President John Williams said Monday.

    The U.S. economy is improving, unemployments coming down and so we are getting closer to the point where I think itd be appropriate for us to think about the pros and cons of raising interest rates, Mr. Williams told reporters during the annual meeting of the American Economic Association in Boston.

    But, he said, I see no reason whatsoever to rush to tightening. I dont see any upside risks to inflation. I think these financial stability concerns that people do raise are real things we want to take into account, but that doesnt argue for moving today or in the next few months relative to, say, later in the year.

  • John Williams Williams said it’s not time yet to raise interest rates, adding that mid-2015 is his recommendation if the economy continues to improve.

    [ August 22, 2014 ]

    “We look at a broad set of measures from different sources about the labor market and I think they're all telling a pretty coherent story of an improving labor market. I don't put all of my emphasis on one statistic or another, but all the indicators are saying things are improving...

    “In terms of raising interest rates, actually tightening monetary policy from where we are now, I think it's really important to remember, although the economy has improved a lot and we're on a good track, there's still quite a bit of slack in the economy,” Williams said. “Unemployment is still quite a bit higher than its normal level and inflation is running below our preferred 2 percent target.” Williams said it’s not time yet to raise interest rates, adding that mid-2015 is his recommendation if the economy continues to improve...

    “Right now I think our expectations, my expectations will be raising interest rates very gradually and not trying to upset or disrupt markets in the economy. We're going to take this at a nice measured pace,” he said.

    Noting that wage growth has been “muted” in recent months, holding steady at barely 2%, Williams said communications with business leaders indicate wages may be moving higher.   “We're seeing some report of some uptick in wage growth relative to that 2% norm,” he said. “I think this is all a positive thing. More wage growth means more money in people's pockets, more consumer spending; that's going to help the recovery.”

    “I'm not concerned about inflation at all,” he added. “You know, for a 2 percent inflation rate for prices we would expect to see wage growth around 3 percent, 3.5 percent. So, some improvement in wage growth from 2 percent up to 3 percent and 3.5 percent, that's desirable and consistent with our goals.”

  • John Williams Any interest rates increases we do have in 2015 will be relatively gradual. Similarly for 2016, the central tendency of the group is to have interest rates 2 percent or a little bit above, which again is very low by any standard. In the FOMC statement, we specifically made note of that.

    [ March 23, 2014 ]

    In my view, we haven’t changed fundamentally. The statement had to evolve because the unemployment rate came down to 6.5 percent. Sure, you do see in the projections that the committee members forecast a little bit higher average interest rate in 2016, but to me that’s consistent with the fact that unemployment has come down a little bit. As we get toward the end of 2016, sure, we’re maybe normalizing monetary policy out there a little bit more than people thought in December. But that’s not a shift in monetary policy. That’s just a reflection that the economy has gotten a little bit better and interest rates might be just a little higher than people thought before.

    In the big picture, the policy hasn’t changed. Any kind of standard way of thinking about monetary policy is, with unemployment lower, then down the road interest rates will normalize a little bit faster. We’re talking again about 2016. There’s no, to my mind, near-term change for monetary policy.

    What does a "considerable period" [after ending asset purchases] mean? It’s not specific about a time frame. That was a conscious decision. My view is if the economy evolves the way I expect, I expect us to end the asset purchase program late this year -- when exactly that occurs will depend. I don’t expect us to start raising interest rates until the second half of 2015.

    Any interest rates increases we do have in 2015 will be relatively gradual. Similarly for 2016, the central tendency of the group is to have interest rates 2 percent or a little bit above, which again is very low by any standard. In the FOMC statement, we specifically made note of that.

    Eventually we’re going to raise interest rates. Understand that any interest rate increases we do are going to be in the context of a shallow glide path, or a gradual process over what looks like several years before we get back to a normal level.

    The view is that we’re going to raise rates relatively gradually, so that at the end of 2016 my own view is that interest rates will be well below 4 percent. Even if 4 percent is the right number -- which, you know, who knows? -- it will take quite a long time before we get to that 4. Of course along the way we’ll be evaluating this and even actually reevaluating whether 4 percent is the right long-run number.

  • John Williams As everybody says, {cutting the IOER} is not going to be a game changer, but given that we're doing a lot of unconventional policy and pushing hard, I think it would make sense. If you can get the funds rate trading a little lower and bring down interest rates a little lower, that's a positive.

    [ December 3, 2013 ]

    Williams is a strong supporter of the Fed's bond-buying program. On Tuesday, he said he believes that the Fed needs to do more to prove it is committed to keeping short-term rates low as long as needed to support the recovery.

    Most importantly, he said, the Fed should give better guidance on what would induce it to raise rates once the U.S. unemployment rate falls to 6.5 percent, the level at which the Fed said has said it would consider an interest-rate hike.



    "Most participants" at the Fed's latest policy-setting meeting thought lowering the rate was "worth considering at some stage," according to minutes of the meeting released last month.

    Critics worry whether money markets can still function if rates fall to zero; indeed, over the years, the Fed has considered and rejected the idea of reducing the rate in part because of that very concern.

    But a new central bank tool blunts that risk, Williams said on Tuesday.

    Known as a fixed-rate full-allotment reverse repo facility, the tool has been touted as a way to mop up excess cash in the financial system once the Fed needs to start raising rates.

    But it could also be helpful should the Fed decide to lower the rate it pays to banks, Williams said.

    "We do have this ability through this reverse repo that's been tested by the New York Fed that basically makes sure we can control short-term interest rates even if we ... lowered the interest on reserves closer to zero,"

  • John Williams All the same, there are reasons to worry that the unemployment rate could now be understating just how weak the labor market is.

    [ September 4, 2013 ]

    Clearly, the unemployment rate plays an important role in our thinking and communication about future policy. Therefore, an important issue is whether it is giving an accurate read on where things stand relative to our maximum employment mandate. The unemployment rate measures the percent of the labor force that is out of work and looking for a job. It has a number of advantages as a measure for summarizing the state of the labor market. For one thing, over time it has proven to be a reasonably stable and predictable barometer of whether labor market conditions are too hot, too cold, or just right in terms of creating inflationary pressures. Although structural changes in the labor market affect the unemployment rate, most of the variation in unemployment over time reflects cyclical factors, that is, whether the economy is too hot or too cold. And, second, the rate closely tracks other indicators of how much slack there is in the labor market, such as data from surveys on the share of households that finds jobs hard to get and the share of businesses that say it’s hard to fill openings. This adds to our confidence in its reliability.

    All the same, there are reasons to worry that the unemployment rate could now be understating just how weak the labor market is. In particular, during the recovery, the share of the working-age population that is employed has increased very little, even as the unemployment rate has fallen. Taken at face value, the very low ratio of employment to population suggests that the labor market has improved far less than what’s implied by the decline in the unemployment rate.

    So should we stop using the unemployment rate as our primary yardstick of the state of the labor market in favor of the employment-to-population ratio? My answer is no. Although the unemployment rate is by no means a perfect measure of labor market conditions, the employment-to-population ratio blurs structural and cyclical influences. That makes it a problematic gauge of the state of the labor market for monetary policy purposes…



    What does that mean for monetary policy? First, the unemployment rate and a number of other labor market indicators, such as payroll job gains, point to continued progress in the labor market. Clearly, we are getting closer to meeting our test of substantial improvement in the labor market.

    Second, any changes in policy will depend not only on labor market conditions, but also on inflation. In our July statement, the FOMC noted that inflation persistently below 2 percent could pose risks to economic performance. That means we will also take into consideration whether inflation is moving closer to our target. Third, any adjustments to our purchases are likely to be part of a multistep gradual process, reflecting the pace of improvement in the economy.

    As I noted earlier, Chairman Bernanke has laid out a timetable for our securities purchases, which includes reducing them later this year and ending them around the middle of next year, assuming our forecasts for the economy hold true. I haven’t significantly changed my forecast since then, and I view Chairman Bernanke’s timetable to still be the best course forward. However, I can’t emphasize enough that when and how we adjust our purchases will depend crucially on what the incoming data tell us about the outlooks for the pace of improvement in the labor market and movement towards our inflation goal.

  • John Williams Any adjustments to our purchase program will depend on the new economic data that come in.  In other words, we will modify our plans as appropriate if economic developments turn out differently than we currently expect.

    [ June 28, 2013 ]

    I would like to emphasize three points regarding the potential timeline for adjusting our asset purchase program.  First and foremost, any adjustments to our purchase program will depend on the new economic data that come in.  In other words, we will modify our plans as appropriate if economic developments turn out differently than we currently expect.

    Second, reducing or even ending our purchases does not mean the Fed will be tightening monetary policy.  Not at all.  The amount of stimulus our purchase program creates depends on the size of our securities holdings, not the amount we buy each month.  Even if we start reducing our purchases later this year, our balance sheet will continue to grow, providing an increasing amount of stimulus.  That is, as long as we are adding to our holdings of assets, we are adding monetary stimulus to the economy.

    Third, future adjustments to our asset purchases in no way alter or undermine our approach of maintaining the current very low federal funds rate at least as long as the unemployment rate is above 6½ percent and the other conditions regarding inflation and inflation expectations are met.  Indeed, as the FOMC projections released last week show, a large majority of Committee participants don’t expect the first increase in the federal funds rate to occur until 2015 or later.  And the median projected value of the federal funds rate at the end of 2015 is only 1 percent.

  • John Williams If things go well, you could imagine ending the program by the end of the year.

    [ June 3, 2013 ]

    With continued “good signs” on jobs and confidence in a “substantial improvement” I could see as “early as this summer some adjustment, maybe modest adjustment downward, in our purchase program,” he said today in Stockholm. The program “is doing this great job of helping the economy gain momentum, and I would want to see that continue well into the second half of this year, but if things, again if they go well, you could imagine ending the program by the end of the year.”

  • John Williams We can adjust [the pace of asset purchases] down some, watch how things progress from there, and then adjust it again one way or the other.

    [ May 23, 2013 ]

    “Even if we do adjust downward our purchases, it doesn’t mean we’re now in some autopilot of moving in the same direction,” Williams, 50, said in an interview yesterday in San Francisco. “You could even imagine a scenario where we adjust it downward based on good data and then adjust it back” if the economy weakened.

    “We can adjust it down some, watch how things progress from there, and then adjust it again one way or the other,” Williams, who doesn’t vote on monetary policy this year, said at the San Francisco Fed. A slowing or end of the purchases also “doesn’t mean we’re going to start tightening policy anytime soon,” he said.

  • John Williams There is indeed little doubt that the economy is on the mend...  Assuming my economic forecast holds true and various labor market indicators continue to register appreciable improvement in coming months, we could reduce somewhat the pace of our securities purchases, perhaps as early as this summer. Then, if all goes as hoped, we could end the purchase program sometime late this year.

    [ May 16, 2013 ]

    There is indeed little doubt that the economy is on the mend. The clearest evidence can be found in housing, by far the sector hit hardest during the recession. Mortgage rates have fallen to levels rarely, if ever, seen before. Typical fixed-rate mortgages are around 3.5 percent, putting them in reach of millions of households. Affordable mortgages fuel demand for homes, and that pushes up sales and prices. Year-over-year, house prices are rising at around a double-digit rate.

    The recovery in home prices has all sorts of beneficial effects. Increasing numbers of underwater homeowners are finding themselves on dry land again. Their properties are now worth more than their mortgages, making them less likely to default. Meanwhile, other homeowners find their mortgages have dropped below the critical 80-percent-of-home-value barrier. That makes it easier to refinance at today’s low rates, freeing money to spend on other things.

    ...

    I expect the unemployment rate to decline gradually over the next few years. My forecast is that it will be just below 7½ percent at the end of this year, and a shade below 7 percent at the end of 2014. I don’t see it falling below 6½ percent until mid-2015. This forecast of a gradual downward trend in the unemployment rate reflects the combined effects of expected solid job gains and a return of discouraged workers to the labor force.

    ...

    It’s clear that the labor market has improved since September. But have we yet seen convincing evidence of substantial improvement in the outlook for the labor market, our standard for discontinuing our securities purchases? In considering this question, I look not only at the unemployment rate, but also a wide range of economic indicators that signal the direction the labor market is likely to take...  [M]ost of these indicators look healthier than they did in September. What’s more, nearly all of them are signaling that the labor market will continue to improve over the next six months. This is good news. But it will take further gains to convince me that the “substantial improvement” test for ending our asset purchases has been met. However, assuming my economic forecast holds true and various labor market indicators continue to register appreciable improvement in coming months, we could reduce somewhat the pace of our securities purchases, perhaps as early as this summer. Then, if all goes as hoped, we could end the purchase program sometime late this year. Of course, my forecast could be wrong, and we will adjust our purchases as appropriate depending on how the economy performs.

  • John Williams But, assuming my economic forecast holds true, I expect we will meet the test for substantial improvement in the outlook for the labor market by this summer. If that happens, we could start tapering our purchases then. If all goes as hoped, we could end the purchase program sometime late this year.

    [ April 3, 2013 ]

    I’m looking for convincing evidence of sustained, ongoing improvement in the labor market and economy. The latest economic news has been encouraging. But it will take more solid evidence to convince me that it’s time to trim our asset purchases. An important rule in both forecasting and policymaking is not to overreact to what may turn out to be just a blip in the data. But, assuming my economic forecast holds true, I expect we will meet the test for substantial improvement in the outlook for the labor market by this summer. If that happens, we could start tapering our purchases then. If all goes as hoped, we could end the purchase program sometime late this year.

    It’s important to note that tapering our purchases and even ending the purchase program doesn’t mean that we are removing all the monetary stimulus that comes from our longer-term securities holdings. Instead, even as we cut back our purchases, we’re still adding monetary accommodation and exerting greater downward pressure on interest rates. Economic theory and real-world evidence indicate that it’s not the pace at which we buy securities that matters for influencing financial conditions. Rather, it’s the size and composition of the assets we hold on our balance sheet. So, even when we stop adding to our portfolio, it doesn’t mean we’re tightening policy.

  • John Williams I anticipate that purchases of mortgage-backed securities and longer-term Treasury securities will be needed well into the second half of this year.

    [ February 20, 2013 ]

    At our January FOMC meeting, we announced we will continue buying longer-term Treasury and mortgage-backed securities at a pace of $85 billion per month.23 Critically, we indicated we will continue these purchases until the outlook for the job market improves substantially, in the context of stable prices. I anticipate that purchases of mortgage-backed securities and longer-term Treasury securities will be needed well into the second half of this year.

  • John Williams “It should be at least that big but I would think it would probably be bigger given my view on how slow the economy is going,” Williams said, referring to his Aug. 31 comment that the Fed should purchase $600 billion in bonds in a third round of asset purchases.

    [ November 5, 2012 ]

    “It should be at least that big but I would think it would probably be bigger given my view on how slow the economy is going,” Williams said, referring to his Aug. 31 comment that the Fed should purchase $600 billion in bonds in a third round of asset purchases.

  • John Williams I should stress that our recently announced purchase program is intended to be flexible and adjust to changing circumstances...  It is explicitly linked to what happens with the economy. In particular, we will continue buying mortgage-backed securities until the job market looks substantially healthier.

    [ October 15, 2012 ]

    I should stress that our recently announced purchase program is intended to be flexible and adjust to changing circumstances. Unlike our past asset purchase programs, this one doesn’t have a preset expiration date. Instead, it is explicitly linked to what happens with the economy. In particular, we will continue buying mortgage-backed securities until the job market looks substantially healthier. We said we might even expand our purchases to include other assets. But, if we find that our policies aren’t doing what we want or are causing significant economic problems, we will adjust or end them as appropriate.

  • John Williams The Fed should consider keeping interest rates low until unemployment falls "somewhat below" 7 percent.

    [ October 10, 2012 ]

    The Fed should consider keeping interest rates low until unemployment falls "somewhat below" 7 percent, Williams told Reuters in an interview, adding that he would tolerate a rise in inflation to 2.5 percent before he would see a need to reconsider the Fed's current zero-interest-rate policy.

    "It's very desirable to try to explain our policy in terms of thresholds," Williams said… "As long as inflation stays within half a percentage point of a 2 percent objective, I think you could argue for a lower unemployment rate" than the 7 percent threshold that Evans has proposed.”

  • John Williams Although we can’t know exactly what the natural rate of unemployment is at any point in time, a reasonable estimate is that it is currently a little over 6 percent. In other words, right now, an unemployment rate of about 6 percent would be consistent with the Fed’s goal of maximum employment.

    [ September 24, 2012 ]

    Although we can’t know exactly what the natural rate of unemployment is at any point in time, a reasonable estimate is that it is currently a little over 6 percent. In other words, right now, an unemployment rate of about 6 percent would be consistent with the Fed’s goal of maximum employment.

  • John Williams If further action is called for, the most effective tool would be additional purchases of longer-maturity securities, including agency mortgage-backed securities.

    [ July 5, 2012 ]

    We are falling short on both our employment and price stability mandates, and I expect that we will make only very limited progress toward these goals over the next year. Moreover, strains in global financial markets raise the prospect that economic growth and progress on employment will be even slower than I anticipate. In these circumstances, it is essential that we provide sufficient monetary accommodation to keep our economy moving towards our employment and price stability mandates.

    If further action is called for, the most effective tool would be additional purchases of longer-maturity securities, including agency mortgage-backed securities. These purchases have proven effective in lowering borrowing costs and improving financial conditions.

    At the Fed, we take our dual mandate with the utmost seriousness. This is a period when extraordinary vigilance is demanded. We stand ready to do what is necessary to attain our goals of maximum employment and price stability.

  • John Williams If the outlook for growth worsens....... then additional monetary accommodation would be warranted. In such circumstances, an effective tool would be further purchases of longer-maturity securities, potentially including agency mortgage-backed securities.

    [ June 6, 2012 ]

    If the outlook for growth worsens to the point that we no longer expect to make sustained progress on bringing the unemployment rate down to levels consistent with our dual mandate, or if the medium-term outlook for inflation falls significantly below our 2 percent target, then additional monetary accommodation would be warranted. In such circumstances, an effective tool would be further purchases of longer-maturity securities, potentially including agency mortgage-backed securities. Past purchases have succeeded in lowering borrowing costs and improving financial conditions, thereby supporting economic recovery.

  • John Williams This is clearly a situation in which we have to keep applying monetary policy stimulus vigorously Under current economic circumstances, most Fed policymakers judge that near-zero short-term interest rates will be appropriate well into 2014.

    [ March 1, 2012 ]

    We are far short of maximum employment. And I expect inflation to fall this year below the 2 percent level that we view as consistent with our mandate. This is clearly a situation in which we have to keep applying monetary policy stimulus vigorously… Under current economic circumstances, most Fed policymakers judge that near-zero short-term interest rates will be appropriate well into 2014.

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    CFA Hawaii Economic Forecast Dinner
  • John Williams Note also that we are not tying our hands by making this announcement. We haven’t made a guarantee. We will alter our policy as appropriate if circumstances change.

    [ September 7, 2011 ]

    At our August meeting, the FOMC took a step in that direction, issuing a statement that we are likely to keep the federal funds rate at exceptionally low levels at least through mid-2013. In one respect, this wasn’t such big news. Even before the announcement, financial market participants generally didn’t expect the Fed to raise rates much earlier than mid-2013. But it was news in the sense that it removed uncertainty and helped financial markets better understand our intentions. In response to the FOMC statement, financial market expectations of future interest rates and U.S. Treasury yields fell. Note also that we are not tying our hands by making this announcement. We haven’t made a guarantee. We will alter our policy as appropriate if circumstances change.

  • John Williams From Reuters:  San Francisco Federal Reserve Bank President John Williams on Wednesday said he expects the U.S. central bank to raise interest rates later this year, three times next year, and a little bit further in 2019.

    [ October 12, 1714 ]

    San Francisco Federal Reserve Bank President John Williams on Wednesday said he expects the U.S. central bank to raise interest rates later this year, three times next year, and a little bit further in 2019.