Federal Reserve Bank of San Francisco President John Williams said he would support one interest rate increase this year and a few more next year, but he added that he would be unperturbed if inflation rose above the US Federal Reserve’s 2 percent goal.
“The US economy is well positioned to raise interest rates,” Williams told reporters in San Francisco on Friday.
Having “a rate increase this year makes sense, having a few rate increases next year makes sense, in the context of how the economy has been performing and continues to perform,” he added.
The Fed is assessing how much progress it has made toward its dual goals of 2 percent inflation and maximum employment as it weighs when to raise interest rates for the first time since December last year.
Officials are not expected to lift rates when they meet in Washington on Nov. 1, the week before the US presidential election, although economists and investors do anticipate an increase at the Fed meeting in the middle of December.
While the US central bank has missed its inflation goal for four years, core inflation has picked up and headline is expected to follow as the effects of an oil price drop fade from the data.
US unemployment is 5 percent — roughly consistent with the level Williams said he views as consistent with full employment.
Officials projected one rate rise this year and two next year, according to the median estimate of their forecasts last month.
Williams said that he would be “definitely not losing sleep” if the Fed overshoots its inflation target, and that it is “absolutely essential that we demonstrate that we can hit this 2 percent inflation goal.”
Williams, who does not vote on Fed policy this year and will not until 2018, said that he would have supported a rate increase last month.
Most Fed voters last month sided with Fed Chair Janet Yellen when the policy-setting US Federal Open Market Committee kept the target range for their benchmark policy rate unchanged at 0.25 percent to 0.5 percent, although several officials have said the decision was a close call.
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