A top Fed official on Friday said that the Federal Reserve Bank is running on track for the potential interest-rate hike, expected by mid-year, indicating the strong economic momentum in the United States as well as the declining rate of unemployment.
While addressing the reporters at the Fed Reserve’s headquarters, San Francisco Federal Reserve Bank President John Williams said, “There is no need to rush to raise rates. But at the same time, it is important to ensure that we appropriately act in a way that we don’t get behind the curve.”
Elaborating further on the probable timing of rate hike, he said, “If the forecast evolves the way I expect, six months from now or whatever middle of this year. We’ll have a better position to understand on whether we need to wait longer or act now.”
Currently, the fed officials are struggling hard with when to gradually wean the country’s economy from over six years of near-zero interest rates, especially at a time when the unemployment rate has declined and the country’s economic growth appears strongly above its long-term trend.
The inflation rate has undershot the two percent target of the Federal Reserve, while some gauges indicate the inflation outlook is declining. This has further prompted a few officials at the Federal Reserve to argue the bank should postpone any increase in the interest rates until next year.
Minneapolis Fed President Narayana Kocherlakota said, “At some point you just have to give in to the data and respond to too-low inflation with stimulus, not tightening.”
On the other hand, St. Louis Fed President James Bullard took an absolutely opposite view, saying even if the rate of inflation is low, it is not that much low to justify the maintaining of borrowing costs at zero.