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San Francisco Fed President John Williams warned Thursday that too much growth could spur an asset bubble and inflation. However he said the long-term trend in annual U.S. economic growth may be as low as 1.5 percent so he doesn't see that happening with low rates to stay.

“Like the pager, the Walkman, and the Macarena, we’re unlikely to see such rates return. Bottom line: In the new world of moderate economic growth, banks need to plan for lower rates,” Williams said

Fed williams

Highlights From Williams Speech

  • Fed in future to rely more on unconventional tools
  • US economy is on track despite hurricanes
  • Mandated cuts to medicare payments dampening inflation
  • No signs yet that neutral rate of interest rates rising
  • Still expects rising wages to help push up inflation
  • Too much growth could spur an asset bubble and inflation

“Banks, and everyone else, need to prepare accordingly,” for a world where global interest rates are permanently lower, Williams said

All the Fed speakers see everything as a new normal with no shocks ahead. I would think Williams is the most pessimestic of the lot also. What could go wrong?

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