Rates Could Rise Sometime this Summer or this Fall – SF Fed President

San Francisco Federal Reserve President John Williams spoke with FOX Business Network’s (FBN) Maria Bartiromo about the United States economy. When asked about when he thinks rates will rise, Williams said, “if the data comes out the way I expect, then I think that first step could be sometime this summer or this fall.” Williams also commented on job growth saying, “we’re going to reach full employment by the end of the year. That’s my own forecast.” When asked about inflation Williams said, “Core inflation is actually, you know, pretty relatively stable” and “my forecast is for inflation to reach about two percent on our preferred measure by the end of next year.”

On when he expects rates will rise:

“It depends on the data, but I do think – my own view is that we’re going to have to watch that data carefully and if the data comes out the way I expect, then I think that first step could be sometime this summer or this fall.”

On the jobs growth across the country:

“Well, first of all, last year was remarkable. We added something like over 3 million jobs. So, we’re in a really good place in terms of the improvement in the labor market that we’ve seen in the last year. I expect this year — we’d also see very good improvement in the labor market, continuing good momentum there. So, I think, you know, we still have a ways to go. Unemployment is 5.7 percent. We need to get closer to 5 percent to be at full employment. We made a lot of progress. And I think this is the year, we’re going to reach full employment by the end of the year. That’s my own forecast.”

On deflation vs. inflation:

“Well, first of all, the decline in the CPI for January, that was driven primarily by falling gasoline prices. We knew that was coming. In fact, gasoline prices are likely to rise over the next few months given what’s happening with oil prices. So, from a monetary policy perspective, it’s really important to look at the underlining trend. Core inflation is actually, you know, pretty relatively stable, so a low. When I look at broader measures of underlying inflation, they seem to have stabilized and I expect inflation trend to start moving back in the latter half of this year.”

On where he sees the inflation trend come from:

“You know, I think commodities is a separate issue. They’ll go up and down depending on global markets. Really what I see is a labor market that is getting stronger and stronger. And historically, when the U.S. economy strengthens, unemployment comes down, we see wage growth pickup. We see pricing power, if you will, among businesses rise. And, you know, that’s the historical pattern. It’s what we’ve seen in other expansions and that’s what I expect happen over the next couple of years. My forecast is for inflation to reach about two percent on our preferred measure by the end of next year.”

Fox Business Network

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