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"I
do see the time to start raising rates in the near future, from
my perspective," San Francisco Fed President John Williams said
in an interview on Bloomberg TV.
The U.S. economy will probably grow about 2 percent or 2.25
percent next year, he forecast, fast enough to push the
unemployment rate "well below" 5 percent and begin to push
inflation back up toward the Fed's 2-percent goal.
Although rate rises should be gradual so as to continue to pull
more sidelined workers back into the labor force and push up
lackluster wage growth, he said, "we don't want to run a
high-pressure economy forever, because we've seen in the '90s
and 2000s, that when you get an unsustainable economy, that
eventually things go wrong, so we want to avoid that."
Investors worldwide have expressed frustration over the mixed
messages from the U.S. central bank in recent weeks. Fed Chair
Janet Yellen and other officials have said they expect a rate
hike will be needed by the end of this year, but two Fed
governors last week urged caution. The Fed has kept interest
rates near zero for nearly seven years.
Asked if Yellen has a mutiny on her hands over the rate hike
decision, Williams said "absolutely not." The decision, he said,
will be based on the economic data, which has lately been "all
over the map." With good arguments both for and against raising
rates, he said, the decision has been, and remains, a "close
call."
Williams declined to say when he personally would like to see
the Fed begin to normalize policy, although he did appear more
cautious than supportive about keeping rates low for much
longer.
"As the economy gets stronger, has gotten stronger, we don’t
really need all that accommodation going forward, and I think
that there are some costs to having very low interest rates," he
said.
Williams, who is a voter on the Fed's policy-setting panel
through the end of the year, refused to rule out next week's
meeting for a rate hike, saying he would listen to his
colleagues' views when they meet in Washington next Tuesday and
Wednesday.
(Reporting by Ann Saphir; Editing by Chizu Nomiyama)
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