2017.05.2522:16:00UTC+00Fed’s Williams Expects Limited Impact from Trump’s Fiscal Policies

San Francisco Federal Reserve President John Williams said that upon analyzing the impact of the Trump administration's fiscal policies on the economy, he concluded that he saw limited short-term gains and little effect for the longer term.

The Fed official said that over the next several months, the fiscal policy will not have much impact on monetary policy. He noted that with U.S. jobless rate currently standing at 4.4 percent and job creation almost twofold of what is needed to provide jobs for those venturing into the workforce, economy is on the verge being 'somewhat hot'.

He recommended that the best strategy to sustain the economy's momentum is to temper the economy slightly by increasing rates at a measured pace.

However, given that inflation continues to fall below the U.S. central bank's two-percent target and as further softened lately, Williams said that there is no strong need to do more tightening in monetary policy this year than the two rate hikes penciled in by policymakers.

Williams said that while the Fed is still on its set course, there is bigger uncertainty surrounding the fiscal policy. He expressed his hope that more light would be shed on some fiscal or federal policies. He said that the fiscal stimulus proposed by U.S. President Donald Trump could by contrast weigh on growth, such as the tax cuts being pushed by the administration.