San Francisco Fed President John Williams has been selling the message that the US economy is strong enough to to withstand the start of the Fed’s tightening campaign, expected some time this year.
He told Reuters that “as we go through time, that probability of saying ‘well, the shocks are going to push us back,’ seems to be less, seems to be decreasing.”
That’s central-banker speak for “rate rises are coming”.
But to stress that monetary policy won’t be driven by optics or “mood”, Williams has been having T-shirts printed that stress that decisions will be driven by the data. The black T-shirts which say “Monetary policy – it’s data dependent” are white prints on black shirts, much like the style favoured by rock fans to show their enthusiasm for bands.
Well, monetary policy is pretty rock ‘n’ roll these days. At least, we think so.
In some of his comments there’s an implication that an increase in rates is not just a symbolic step toward policy normalisation, but potentially the start of a push higher in rates.
He said the normalisation process would take “several years” and stressed that “if the economy got some bad shocks, really you are probably just talking about flattening that path out a bit, or maybe raising rates more slowly.”
Williams is saying rates are going to rise but that the first move and the subsequent pace of rate hikes is not set in stone.