Monetary policy accommodation will end at some point, but not soon, since the economy is “still fragile,” Federal Reserve Bank of San Francisco president John C. Williams said Friday

Noting that inflation is expected to remain in line with targets for the next few years, and progress is being made on “the employment part of our mandate,” Williams said, “we have a long way to go,” according to a prepared text of his speech to the California Bankers Association released by the Fed.

Since “substantial risks” could derail the recovery, “it’s crucial that we continue our highly accommodative monetary policy,” he said. “Of course, very low interest rates won’t last forever. As the economy picks up, the Fed will reduce accommodation and begin to raise interest rates.”

At that point, he said, the Fed will also “unwind the unconventional monetary policies,” including liquidating Treasury and mortgage agency security holdings.

“But that day is still far off. I am increasingly hopeful that the recovery has entered a phase of self-sustaining growth,” Williams said, noting that consumer confidence and spending are up and the manufacturing sector is healing.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.