High unemployment and low inflation levels require monetary accommodation, despite an improving economy, San Francisco Federal Reserve Bank President John C. Williams said Tuesday.
"In a nutshell, the combination of too-high unemployment and too-low inflation calls for continued monetary accommodation," Williams told Lambda Alpha International and the Arizona Bankers Association, according to prepared text of a speech released by the Fed. "In this regard, I want to stress that scaling back on asset purchases is not a retreat from accommodative monetary policy. The federal funds rate will remain near zero for the foreseeable future."
GDP growth may reach 3% this year and next, up from about 2.5% in 2013, he said, pointing to advances in the banking and housing sectors, despite challenges. " things are definitely looking up. We're still not where the economy should be, but we're well on the road to recovery, and I see things getting better in the year ahead," he said.
He spoke about the economic strength, noting, "After years of fits and starts, the economy appears to be on a much stronger path than we've seen in some time the economic data have been quite encouraging, and there's reason to believe that this year, the economic recovery will gain further momentum."
Referring to the tapering, William said, " we're starting to ease off the gas, but we're nowhere near hitting the brakes yet."
"Assuming the economic recovery plays out as we expect, we will likely continue to reduce the pace of those purchases, and eventually eliminate them, over this year," said Williams. "This will be an important first step towards eventually bringing monetary policy back to a more normal setting."
