“In a perfect world, we’d find a way to use our economic projections to come up with a document that explained this in words,” he said. “Right now economic projections are kind of a statistical artifact, and there’s no story to go along with that.”

Evolving Forecasts
The dot plot will be updated at the Fed’s next meeting on June 12-13, at which investors widely expect officials to raise rates for the second time this year. In March, the projections showed three to four hikes in 2018.

Williams said in a speech earlier on Tuesday in Minneapolis that he still thinks three to four rate hikes will probably be appropriate, thanks to a strong economy and solid labor market. He did not see signs that inflation is poised to dramatically overshoot the Fed’s 2 percent goal -- especially because wage growth has been slow to ramp up.

“It is a reason, a serious reason, that I’m not that worried about inflation, or wage inflation, or price inflation, being on the cusp of an outburst,” Williams said during the interview. In a world where inflation expectations have been contained for years, “the kind of wage-price spirals that we saw in the 60’s and 70’s don’t look likely to occur.”

Stronger Economy
Even as unemployment continues to drop -- falling below 4 percent in April for the first time since 2000 -- and inflation comes in at 2 percent, the outlook is not without hazards. One of those is the potential signal being sent by a flattening yield curve. An inverted yield curve -- when shorter-term borrowing costs rise above long-term ones -- has historically been a harbinger of a recession, and the spread between five- and 30-year Treasuries has recently narrowed to the lowest since 2007.

Fed’s Bostic Says Job Is to Prevent Inversion of Yield Curve (1)

“Am I worried today about the fact the yield curve is flat? No. Because I think that’s driven primarily by the fact that the Fed is tightening, long rates are moving up, but not surprisingly, not one-for-one,” Williams said. “But I do think that we need to keep our eye on what happens to the yield curve in the next year or two, as we continue to raise interest rates.”

Asked whether he could justify hiking rates if it meant inverting the yield curve, Williams said the exact situation would matter.

“I don’t see that as a situation that we would be running into in the next year or so, but I think the answer to that depends on the context,” he said. “If we’re in a really strong economy with high inflation, then I think you need to have monetary policy to adjust to that.”

At the same time, “I definitely wouldn’t ignore signals we’re getting from the markets.”