Fed’s Williams says March ‘very much on the table’ for rate increase

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John Williams, president of the Federal Reserve Bank of San Francisco, says that an interest-rate increase is “very much on the table for serious consideration” by the central bank at its upcoming meeting in March.

The remarks — which came in the text of a speech set to be delivered on Tuesday to business leaders in California — sent investors’ expectations climbing. Fed funds futures signalled that investors are now pricing in a 56 per cent chance of an increase at March, up from 52 per cent earlier on Tuesday, and 36 per cent a week ago, according to Bloomberg calculations.

Mr Williams cited a strong outlook for the economy, which he said was in its eighth year of expansion with the workforce at full employment and inflation zeroing in on the Fed’s 2 per cent target. A rate increase would be one tool Fed policymakers could consider to help keep that momentum going, he said, according to a text of his prepared remarks.

Mr Williams is an alternate voting member of the rate-setting Federal Open Markets Committee, he has recently taken a hawkish tone in his public appearances, arguing that gradual increases in rates could help keep mitigate the hazards of an overheating economy, particularly given employment levels.

The speech also pushed down the price on the 2-year US Treasury note, which is considered to be most sensitive to policy changes. Its yield — which moves inversely to its price — was recently up 3.4 basis points to 1.23 per cent.

The next FOMC meeting is scheduled for March 14-15. The central bank signalled last year that it was eyeing as many as three rate increases over 2017, although it demurred on any action at its first meeting of the year on January 31-February 1.

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