Fed's Williams: 2 or 3 rate hikes reasonable this year, but dependent on data

Two or three Federal Reserve interest rate increases this year would be "reasonable," but the central bank will continue to watch economic data, San Francisco Fed President John Williams said Thursday.

"We should stay on our basic strategy of gradually reducing accommodation," he told CNBC from the sidelines of a conference on monetary policy at Stanford University's Hoover Institution.

Williams does not vote on the Fed's policymaking committee this year. Last month, the Federal Open Market Committee voted to keep its target range for the federal funds rate at 0.25 to 0.5 percent as it monitored global economic developments and progress toward its 2 percent inflation target.

Williams' comments came ahead of the release of the government's April jobs report on Friday morning and after a weak initial first-quarter gross domestic product reading last month. Williams urged caution about "overreacting" to the data but said the Fed will watch whether GDP sluggishness persists.

"I'm not taking too much of a signal from the first-quarter GDP," he said.

Williams touted progress in the labor market and said concerns about a global slowdown have dissipated somewhat.

He also addressed comments earlier Thursday by presumptive Republican presidential nominee Donald Trump, who said he would "likely" replace Janet Yellen when her term as Fed chair ends in 2018. Williams said he is "100 percent in full support" of Yellen, adding she is "doing an absolutely terrific job."

Earlier he told Reuters the central bank will likely have to take the U.K.'s decision on whether to leave the European Union into account at its June meeting. Britain's referendum takes place June 23, about a week after the Fed's gathering.

"We're going to have a lot better information by the middle of June about 'Brexit' and what polls show and how the markets are reacting," Williams said at the conference. "Clearly if there's an expectation that it actually will pass and the markets will react to that then we have to take that into consideration in terms of how it affects the U.S. economy and the outlook."

— Reuters contributed to this report.