Fed's Williams: I don't see any rapid increase in inflation coming

WASHINGTON (Reuters) - The Federal Reserve should continue to raise interest rates in a gradual way and there appears to be no abrupt rise in inflation on the horizon even as price gains have moved toward the central bank’s target, San Francisco Fed President John Williams said on Friday.

FILE PHOTO: San Francisco Federal Reserve President John Williams speaks to Reuters in San Francisco, California, U.S., September 27, 2016. REUTERS/Stephen Lam/File Photo

Williams, who in June is set to become the head of the New York Fed, seen as the second-most influential position at the U.S. central bank, also said that he is comfortable with inflation overshooting the Fed’s 2 percent target for a period of time.

“They’ve been picking up (inflation data), moving closer to our 2 percent trend but I don’t see any rapid increase in inflation coming, so I feel this is pretty much a ‘Goldilocks’ economy,” Williams said in an interview with broadcaster CNBC.

“Given that inflation has been below our target for a number of years, I think it is important to reinforce that message that we think of 2 percent as the midpoint of where we expect inflation to be and I am personally comfortable with the fact that inflation may overshoot that 2 percent for a while,” he added.

U.S. payrolls increased solidly in April, albeit at a slower-than-expected pace, while the jobless rate slipped to a near 17-1/2-year low of 3.9 percent as some Americans left the labor force, the Labor Department reported on Friday.

The same report showed that wages barely rose last month.

In a statement following a meeting on Wednesday, Fed policymakers made clear that the 2 percent inflation goal is a ‘symmetric’ aim, meaning they will not be immediately concerned with increases above it.

The central bank raised interest rates in March and currently forecasts another two hikes this year, although an increasing number of policymakers see three as possible.

Williams said a total of three or four rate hikes this year remained the base case. “I still think that’s the right way to think about it given the continued improvement in the economy,” he said.

Investors overwhelmingly expect a rate hike at the June 12-13 policy meeting.

Reporting by Lindsay Dunsmuir; Editing by Chizu Nomiyama