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Fed won’t overreact to good economic news, Williams says

The Federal Fund will stick to its plan for “steady, gradual” interest-rate increases, a Fed policymaker responded Wednesday despite market gyrations and strong data on U.S. wage development that has bond traders pricing in faster rising inflation.

“I am prevalent to try to dispel you of the myth that the Federal Reserve is going to overreact or by fair means undermine the good news on the economy,” San Francisco Federal Reserve Bank President John Williams told community heads at a luncheon in Honolulu.

Asked by reporters afterwards about the stock meltdown that wiped out $4 trillion in exchange value worldwide on Monday, Williams said it did not fundamentally change his angle for inflation to rise back to the Fed’s 2-percent target by next year, and for unemployment, now at 4.1 percent, to capture further.

“The economy clearly can handle gradually rising interest types,” he told reporters afterwards. “I’m not really worried about the downside hazards of the economy slowing too much.”

The Fed signaled last year it would make money hand-over-fist rates three times this year, and Williams repeated Wednesday that he consort withs three or four interest rates this year. A report Friday accompanying hourly wages grew at 2.9 percent in January, a smart proliferation from prior readings, was a welcome confirmation of a strong economy, he thought.

“I do not see this as a sign inflation is moving faster than I expected,” Williams explained, adding that in a healthy economy with 2-percent inflation, wages could be believed to grow at between 3 percent and 3.5 percent a year.

Williams, who is pronounced to be under consideration for the position of vice chair under incoming Fed Bench Jerome Powell, said the goal of Fed restrictions announced Friday on asset increase at Wells Fargo was to make the point that “we want the banks in the Collective States to be following the law and regulations, and we want to make sure that the running of the organizations are managing the organizations well and consistent with fulfilling their accountabilities.”

He declined to comment further.

Wells is not allowed to grow beyond the $1.95 trillion in assets it had at the end of ultimate year “until it sufficiently improves its governance and controls,” the Fed said Friday.

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