Ann Saphir
HONOLULU (Reuters) - The Federal Reserve will stick to its plan for “steady, gradual” interest-rate increases even though recent U.S. economic data has been stronger than some have expected and the labor market has tightened, a Fed policymaker said Wednesday.
“I am going to try to dispel you of the myth that the Federal Reserve is going to overreact or somehow undermine the good news on the economy,” San Francisco Federal Reserve Bank President John Williams told community leaders at a luncheon in Honolulu.
The U.S. economy, helped along by strong financial conditions, global growth and the Trump administration’s tax cuts, is “healthy,” he said, and the U.S. labor market is likely to tighten further, inflation will rise and wage growth will pick up.
As inflation moves back up this year toward the Fed’s 2-percent goal, and the unemployment rate, now at 4.1 percent, falls even lower, “it makes sense for us to further gradually raise interest rates” this year and next, he said.
Still, he said, “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,” said Williams, who votes this year on Fed policy and is said to be under consideration for the position of vice chair under incoming Fed Chair Jerome Powell.
Williams made no reference to the stock meltdown that wiped out $4 trillion in market value worldwide on Monday; markets have regained some of those losses since.
Reporting by Ann Saphir; Editing by Diane Craft
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