(Reuters) – The Federal Reserve will probably need to keep interest rates near zero for at least another year, a top Fed official said on Monday, even as he expressed optimism the economy is well on its way to health.
“As things get better we can kind of get back to our normal approach to policy,” San Francisco Fed President John Williams told members of the Utah and Montana Bankers Association, predicting full employment and normal inflation by the “early part” of 2016.
As for rate rises, he said, “I still see that as some time off in the future,” telling reporters that he still believes a rate rise will not be appropriate until the second half of 2015.
The Fed should “stop answering” questions about precisely when it will raise rates, he said, because markets can swing strongly if expectations suddenly shift.
Williams forecast real GDP would bounce back from its shocking decline in the first quarter, to grow at a pace faster than three percent through the end of 2014, and then a bit above three percent in 2015 and 2016.
That will be fast enough, he said, to push the current unemployment rate of 6.3 percent to 6 percent by the end of this year and 5.5 percent by the end of next year.