16.05.201801:04:00UTC+00Fed’s Williams Sees Three to Four Rate Rate Increases in 2018 as Appropriate Policy Path

San Francisco Federal Reserve President John Williams said that he view three or four interest rate hikes this 2018 is the appropriate direction for monetary policy.

Addressing the Economic Club of Minnesota in Minneapolis, Williams said that the US is currently in its second-longest growth streak in history and expressed his optimism regarding the domestic and overseas economic outlook. The Fed official also said he supports the monetary policy-setting FOMC's projections that three or four rate hikes this year and further gradual rate increases in the next two years is the correct path for monetary policy.

Williams, who will become the head of the New York Fed on June 18, said that inflation is nearing the central bank's two percent target following a temporary slowdown in 2017 and pointed out that unemployment is at its lowest level in 18 years, boosting his confidence in the outlook.

The Fed official said he would not be too worried if price pressures overshot the inflation target by a few tenths of a percentage point.

But Williams warned that he still perceives the so-called neutral interest rate remaining longer in the longer run, putting a limit on how high the U.S. central bank will be able to increase rates over the course of its tightening cycle before stemming growth. He sees the neutral rate to be around 0.5 percent today or around 2.5 percent when taking into account the inflation being around the Fed's two percent goal.

Investors anticipate the Fed will lift borrowing costs for a second time this year when they convene in June and see the possibility of three or four moves for the year.