LOS ANGELES - John Williams, president of the San Francisco Federal Reserve Bank, said Tuesday that he expects the U.S. to continue to experience "moderate growth," adding that he believes that inflationary pressures remain contained.

Speaking on a panel at the Milken Institute's Global Conference, Williams said that he does not expect the Fed will have to increase interest rates "for quite some time."

But he added the Fed will act if there are any signs of inflationary pressures.

"We know what to do," he said.

Williams said he expects inflation to "continue to be around 2%." He added, "We've done a pretty good job in keeping inflation low."

Williams said the U.S. economy has struggled to emerge from the most recent recession, in large part because of the collapse of the housing sector. The housing sector, he said, is "clearly still struggling."

He added that housing "right now is still quite weak."

Williams said households lost about $7 trillion in paper value in the recent housing collapse. While households are recovering, he continued, they are not likely to be a "powerful engine of growth."

Williams said the inability of renegotiating mortgage contracts has been "at the heart" of the housing collapse.

He said that the U.S. is facing a "lot of uncertainty" regarding the future of fiscal policy, given the scheduled expiration of the Bush tax cuts, the triggering of substantial across-the-board spending cuts, and a coming debt ceiling vote at the end of this year or early next year.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

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