That helps explain why policy makers expect they will probably need to raise the federal funds rate above its estimate of the so-called neutral interest rate some time next year.
The neutral interest rate is the rate that in theory would keep unemployment stable. Williams said he expects the jobless rate to continue to fall.
The current target range for the federal funds rate is 1.75 percent to 2 percent. The June projections show most FOMC participants see the neutral interest rate as around 2.75 percent to 3 percent, with the median estimate for a fed funds target range of 3 percent to 3.25 percent by the end of 2019.
Williams noted that estimates of the neutral rate haven’t moved much in the past couple years. “I don’t see any clear signs why I would expect that trend to change very much,” he added.
This article was provided by Bloomberg News.