Date
28 March 2017
John Williams says last week's decision by the Federal Reserve to hold off on an interest rate hike was a close call. Photo: Reuters
John Williams says last week's decision by the Federal Reserve to hold off on an interest rate hike was a close call. Photo: Reuters

Fed official still sees 2015 US rate liftoff

An interest rate hike is still likely this year after a US Federal Reserve official called last week’s decision to stand pat a “close call”.

San Francisco Fed president John Williams said the arguments for and against beginning to tighten US monetary policy are about balanced now that the economy is on solid footing.

Williams, suggested he is almost ready to pull the trigger on a rate hike, Reuters reports.

He is the first US policymaker to speak publicly since the Fed’s much-anticipated decision on Thursday,

However, Williams said the risks from a slowdown in China and global downward pressure on inflation mean a rate rise in 2015 is not guaranteed.

He said full US employment should be achieved “in the near future” and inflation, while still too low for comfort, should gradually move back to a 2 percent goal.

“Given the progress we’ve made and continue to make on our goals, I view the next appropriate step as gradually raising interest rates, most likely starting sometime later this year,” he said at a weekend conference on the China-US financial system.

The Fed’s decision to leave rates near zero “was a close call in my mind, in part reflecting the conflicting signals we’re getting,” he said.

“The US economy continues to strengthen while global developments pose downside risks to fully achieving our goals.”

On Thursday, the Fed cited risks from abroad and downward pressure on US inflation from a high dollar and low commodities as reasons to stand pat.

Investors reacted to the cautious tone by pushing bets of a rate hike into 2016, with a Fed meeting in January given a near 50 percent probability, according to futures markets.

Policy-setting meetings are also scheduled for October and December.

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