Key commentaries from San Francisco Fed President

John Williams, president of San Francisco John Williams said that he thinks that Federal Reserve should increase rates sooner than later. These commentaries are important, given the fact they come after a weak payroll data and a weak ISM manufacturing report. NFP report showed that just 151,000 people were added to the payroll in August and ISM manufacturing PMI deteriorated sharply to just 51.4 in August compared to 55.5 in July.

According to Mr. Williams, the U.S. economy has reached full pace and hence monetary policy should respond to it. In a speech in Nevada, Mr. Williams said, “The economy has climbed back to full strength, and it therefore makes sense to move monetary policy gradually back to normal…………In the context of a strong economy with good momentum, it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later.” A few weeks back, Mr. Williams called for a change in approach in U.S. monetary policy and called for a higher inflation target as it would provide the Fed with more rooms to maneuver.

The market’s expectations of a rate hike from Fed for this year reached above 60 percent last week but since Friday, the hawks have taken a backseat.