| SEATTLE, March 5
SEATTLE, March 5 The Federal Reserve will
probably need to start raising short-term U.S. interest rates in
the middle of next year as economic growth picks up and the
jobless rate falls, a top Fed official said on Wednesday.
"My own view, based on my own forecast, is that it would be
sometime around the middle of next year. It could be later or
earlier, depending on how the economy does," San Francisco Fed
President John Williams told reporters after a speech to
students at the University of Seattle.
The economy will probably grow around 2.5 percent this year,
and about 3 percent next year, he said. That will bring the
unemployment rate down to about 6.25 percent at the end of this
year and to around 5.5 percent at the end of next year.
But because of the lasting damage of the financial crisis to
the economy, Williams said, the Fed may not raise rates all that
high, at least at first.
"My own view is that we still have significant, if you will,
headwinds to the economy over the next several years that are
still slowing growth in terms of demand, relative to trend, so
that we need a lower real interest rate, fed funds rate, than
you would in say, over history," he said.