Federal Reserve policymakers should not wait too long to raise interest rates, a top U.S. central banker said on Thursday, because doing so could mean "drastically" overshooting on inflation and forcing the Fed to hike rates dramatically.
"I think that by mid-year it will be the time to have a serious discussion about starting to raise rates," San Francisco Fed chief John Williams said.
With the U.S. economy likely to reach full employment by year's end or even sooner, and inflation looking likely to return to 2 percent within the next two years, waiting on raising rates is riskier than going ahead and starting, he said.
"Overshooting our target would force us into a much more dramatic rate hike to reverse course, which could have a destabilizing effect on the markets and possibly damage the economic recovery," Williams said in remarks prepared for delivery to the CFA Society of Hawaii.
"I see a safer course in a gradual increase, and that calls for starting a bit earlier."