Rise in interest rates does not reflect inflation worries, Fed's Williams says

The recent rise in market interest rates is not a reflection of worries about inflation, a top US central bank official said.

In remarks to Bloomberg TV, the President of the Federal Reserve bank of New York, John Williams, described the recent move higher in longer-term interest rates as the typical reaction to a strong economy.

He said rate-setters were not seeing signs of undue inflation pressures, describing the then current situation of the economy as a "goldilocks scenario".

Williams also said he expected a strengthening trend in wages, which would be consistent with a strong jobs market.

But officials at the Fed were watching the data carefully and not yet seeing indications that wages were feeding into higher inflation, Williams said, adding that he was "not worried about inflationary pressures for next year or two".

Regarding the so-called 'neutral' rate of interest, Williams emphasised that policymakers did not know exactly were it lay.

He also stressed that the neutral rate of interest was just one "piece of the puzzle", whereas rate-setters looked at a lot indicators, albeit one that he did follow closely.

The Fed's goal was to keep the economy growing strongly and in a balanced fashion with inflation around 2.0%, he said.

Asked about the so-called 'Philips curve' and to what extent it could still be relied upon to predict the relationship between wages and inflation, Williams appeared to point to the fact that the public did believe the Fed would meet its mandate for inflation at 2.0% as a reason why the relationship between salaries and joblessness was now looser.

On tariffs, at present he was not overly concerned, but he would be should there be a "significant" increase in tariffs in the US and abroad, adding that studies about their potential impact were underway.