The U.S. economy remains on track for a gradual path of interest rate hikes and fears over the impact of a slowing global economy and bouts of financial volatility are overdone, San Francisco Federal Reserve President John Williams said on Tuesday.
“Others’ economic fates do not spell our own,” Williams said in a speech at the National University of Singapore on a trip to Asia.
“My view is essentially, let’s just stay on track. Let’s not get sidelined by the noise and distraction commentary can sometimes cause.”
The U.S. central bank left interest rates unchanged two weeks ago and signaled its cautiousness by forecasting two further rate hikes this year, down from four at its December meeting, when the Fed raised rates from near zero for the first time in almost a decade.
But Williams, who has been consistent in providing a more upbeat assessment of the U.S. economy over the past few months, said he expects the unemployment rate to fall to about 4.5 percent by late 2016 and for inflation to return to the Fed’s 2 percent target over the next two years.
“We’re not quite where I’d like us to be, but recent developments have been very encouraging and add to my confidence that we’re on course to reach our (inflation) goal,” he said, citing an uptick in oil prices and a stabilizing dollar.
Overall, the U.S. economy “keeps chugging ahead,” he said.
Asked about the inflation outlook, Williams said there were some encouraging signs in core inflation data.
“The last few months have actually been looking really good on CPI and PCE prices and I do want that to continue,” he said during an audience Q&A session.
“If it continues for the next few months, I will be pushing forward my inflation forecasts,” Williams said.