San Francisco Fed's Chief Won't Rule Out June Rate Hike -- Nikkei

        SAN FRANCISCO (NIKKEI) -- While economic data should ultimately determine when the Federal Open Market Committee raises interest rates, members ought to have "a serious discussion" on the timing in June, says John Williams, president of the Federal Reserve Bank of San Francisco said in an interview with The Nikkei.
        "I wouldn't want to eliminate the possibility of a rate hike in June," Williams said.
        Fed watchers see that month's meeting as the earliest date for a rate increase.
        Williams, who serves as one of the voting members of the FOMC this year, has never voted against a policy action since taking charge of the San Francisco Fed in 2011. He is regarded as a mainstream member close in thinking to Fed Chair Janet Yellen. The fact that he mentioned the possibility of a June rate hike could lend credence to this scenario in the markets.
        Data-driven decision
        The U.S. has seen "remarkable" improvement in the labor market, with more than 3 million jobs added last year, Williams said. He predicts that the unemployment rate will fall to 5.2% within the year, a rate he regards as "normal".
        Sluggish wage growth -- at around 2%, wages are rising at only half their pre-financial-crisis speed -- is perceived as a hurdle to raising interest rates. Williams said expects the pace to pick up as unemployment nears 5% later this year. His view rests on a prediction that, as the labor market tightens, more employers will offer part-time workers full-time positions in order to secure both quantity and quality in the labor force.
        Inflation will also factor into the Fed's interest rate decision. At around 1.5%, the current pace of consumer price growth is below the Fed's target of 2%. But "we're not seeing a broad-based decline in the inflation rate," Williams said, adding that the softness was confined mostly to areas sensitive to energy prices.
        And the Fed has to consider not only the current inflation rate but also the outlook for next year or the year after, he said. "Our monetary policy actions take a year or two to affect the economy."
        The FOMC has said it "can be patient" in moving toward a normal monetary policy, in essence telling the financial markets not to expect a rate hike in March or April. To signal a rise in June, the committee may need to change its language at its meeting next month.
        Williams said the Fed has "different ways to try to accomplish this."
        "We do have a dictionary," he added.
        (END) Dow Jones Newswires

        February 23, 2015 18:18 ET (23:18 GMT)

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