Fed’s Williams Sees Two Rate Hike in 2016

Federal Reserve Bank of San Francisco President John Williams sees as many as two interest-rate increases this year despite the second-quarter GDP growth was 1.2 percent.

“There’s definitely a data stream that could come through in the next couple of months that I think would be supportive of two rate increases,” Williams told reporters Friday after speaking in Cambridge, Massachusetts. “There’s data that we could get that wouldn’t be supportive of that — it could be one, maybe, or none. Time will tell.”

Williams spoke hours after the Commerce Department reported second-quarter Gross domestic product growth of 1.2 percent, much below analysts’ estimates of 2.6 percent growth. The disappointing figure may affect fed’s decision on rate hike.  Some investors think that the central bank will not raise interest rate this year as the economy seems to have the risk of entering another recession.

But Williams think that the economy is doing good, saying that the second-quarter gross domestic product reading was weak because of swings in inventories and government spending and other data is still looking good.

“It makes sense to continue on the process of the gradual removal of accommodation — my personal view is it makes sense, assuming the data will support that, to raise rates again this year, but it is data-dependent,” said Williams. “We’ll get a couple more employment reports, more data on inflation before our next meeting.”

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