Fed's Williams continues to see gradual rate hikes ahead

The head of the Federal Reserve bank of New York argued in favour of continued gradual interest rate hikes in the US in order to sustain the economic expansion.

According to reports, in a press briefing on Tuesday, John Williams emphasised how in its last policy statement the Federal Open Market Committee, the US central bank's main decision-making panel, had used the adjective "strong" five times to describe the American economy.

Economic growth in the States was set to slow next year, but only by a bit, from an annual rate of 3% to 2.5%, as the tax cuts enacted by the White House would continue to act as a "tailwind", he said.

In parallel, the rate of unemployment would continue to fall, reaching 3.5%, while inflation would run just a tad above the Federal Reserve's target of 2.0%.

Although he was alert to signs of a possible faster slowdown, his base scenario remained "very positive" and not all risks on the horizon were pointing to the downside.

Indeed, Williams placed even odds on the possibility that inflation would accelerate more quickly than he was anticipating, while also stressing the central bank's so-called 'data dependency'.

As as an aside, on 30 November Williams delivered a speech in which he reviewed the possible options that were being reviewed as part of a study of whether the Fed's current strategy for monetary policy should be revamped, including by shifting towards targeting average inflation or targeting a set price level.