Bloomberg News

Williams Says ‘Vital’ for Fed to Aid ‘Suffering’ Economy

January 12, 2012

(Updates with inflation forecast in sixth paragraph.)

Jan. 10 (Bloomberg) -- Federal Reserve Bank of San Francisco President John Williams said it’s “vital” for policy makers to support a U.S. economy hobbled by high unemployment, anemic spending and a weak housing market.

“We at the Fed are doing everything we can to move the economy forward” and need “tax and spending policies” that would complement the central bank’s moves, Williams, 49, said today in the text of a speech in Vancouver, Washington. The San Francisco Fed chief took office in March 2011 and casts his first vote as a policy maker this year.

Policy makers disagree over whether they should see if the economy slows before trying to further cut borrowing costs and spur job creation. The economy is expanding moderately amid “apparent slowing” in global growth, with “some improvement in overall labor market conditions,” Fed officials said last month. The unemployment rate fell to 8.5 percent from 8.7 percent in November, the government reported last week.

The economy should grow by 2.5 percent this year and about 3 percent next year, not enough to bring down an unemployment rate that will stay above 8 percent next year and around 7 percent at the end of 2014, Williams said in remarks to the Columbian’s 2012 Economic Forecast Breakfast.

With the labor market far from full employment and inflation likely to decelerate, “it’s vital that the Fed use all the tools at its disposal to achieve its mandated employment and price stability goals,” he said. He refrained from calling for new actions by the Fed, asking instead for federal programs to support housing.

Inflation May Slow

Inflation should fall to 1.5 percent this year and next, from about 2.5 percent in 2011, Williams said. The Fed’s preferred price gauge, the Commerce Department’s measure that excludes food and fuel and is tied to consumer spending, was up 1.7 percent in the year ended in November, at the lower end of Fed policy makers’ long-run projection of 1.7 percent to 2 percent.

Williams was the first Fed official to signal the possibility the central bank would release interest rate forecasts, telling reporters in November such a move would be “useful” and has worked well in other countries. The Fed plans to distribute its anticipated path for the fed funds rate after its next meeting on Jan. 24-25.

The San Francisco Fed chief, who oversees the Fed’s largest district, served as a senior economist for the Council of Economic Advisers during the Clinton administration. The Sacramento native succeeded Janet Yellen, now the Fed board’s vice chairman.

--Editors: James Tyson, Christopher Wellisz

To contact the reporters on this story: Vivien Lou Chen in San Francisco at; Anthony Effinger in Portland at

To contact the editor responsible for this story: Christopher Wellisz at

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