Fed’s Williams says Fed on track to lift rates unless inflation fails to rise

Federal Reserve policymaker John Williams’ comments on Tuesday suggested that the Fed and remains on track to lift rates despite the growing concerns in financial markets over weakness in Europe and China.

Williams indicated during an interview that the US central bank should only delay an interest rate hike next year if inflation or wages fail to move higher. He currently expects rates to rise by mid-2015.

As signals of European weakness grew stronger last week, investors pushed back their expectations for when the Fed would raise rates from June to September of next year, and they see a more gradual pace of rate hikes than predicted by Fed officials.

Asked about shifting investor bets, Williams expressed little concern, saying markets had a fundamentally correct view of the likely path of Fed policy.

If the outlook changes “significantly,” with inflation showing little sign of returning to the central bank’s 2-percent target, Williams said he would even be open to another round of asset purchases.

The US dollar has paused its recent rally but the long term expectations are for it to strengthen.