FX.co ★ US economy close to Fed objectives

Federal Reserve Bank of San Francisco President John Williams said the US economy is close or reached the Fed’s goals including full employment and price stability.

Williams also said that the US central bank wants to make sure the markets are calm as it is gradually tightening its monetary policy.

“The US economy is about as close to the Fed’s dual mandate goals as we’ve ever been,” Williams said. “It’s more important than ever for monetary policy to work toward what I like to call a ‘Goldilocks economy’ – an economy that doesn’t run too hot or too cold.”

Based on data on full employment and inflation, it is projected that the US economic growth will reach the target of 2% by 2018.

In March 2017, the Fed raised rates and hinted at two more hikes this year. Williams believes such a pace makes since. The Feed will meet in June to decide on its monetary policy.

The regulator is also expected to shrink its balance sheet accumulated during the years of bonds purchase to boost investment and hiring after the recession. The Fed’s balance sheet grew to about $4.5 trillion in assets.

Last year, Williams, who worked closely with Fed Chair Janet Yellen, said that a balance sheet cut would start gradually and would take about 5 years.

He also noted that the regulator's balance sheet should significantly decrease compared to its current volume, but the decision on the desired level has not yet been made.

Last time when the Fed changed its balance sheet policy, domestic and international markets crashed. This time, Fed will try to avoid this happening again.