Q. and A. With the Fed’s John Williams: Timing of the Rate Rise

John Williams, president of the Federal Reserve Bank of San Francisco, says he’s done talking about which month the Fed will start to raise its benchmark interest rate.

“I’ve sworn to myself that from now on the only months of the year I’ll refer to is months that have reference to births and anniversaries,” he said in an interview this week.

But Mr. Williams did offer a specific answer about the timing of that first increase: He will vote to raise rates, he said, when he expects unemployment to fall to its minimum sustainable level within the next year, and inflation to rise to 2 percent within the next two years.

He also offered his thoughts on the great debate between Ben Bernanke and Larry Summers, and the consequences for monetary policy.

Q. Do you expect the Fed to start raising interest rates by September?

A. Moving away from the date-based guidance, trying to indicate what we will or will not do, I thought that was a really important step. It gets all of us away from thinking about this meeting vs. that meeting. I may have a view, but in a way it’s irrelevant. As the data come in, whether it’s on the employment mandate or the inflation mandate, I’ll change my views of where we are or where our trajectory is on that. I’ve sworn to myself that from now on the only months of the year I’ll refer to is months that have reference to births and anniversaries.

Q. But you’ve said that you think the Fed should raise rates this year?

A. I do believe that we should be initiating rate increases later this year. I’m still a 2015 person. But I do also think the more important part of this story is not the date of the liftoff but what is the pace of tightening expected to be.

(via NYT)