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The U.S. Federal Reserve must be patient and guided by data when considering whether to raise interest rates, New York Fed president John Williams said on Friday, in remarks reinforcing the central banking system’s commitment to a wait-and-see approach.

Mr. Williams said inflation pressures remain mild, yet the economic “tailwinds” that boosted the economy “have lost their gust” in 2019, owing partly to a continuing partial shutdown of the U.S. government.

If those pressures cause the economic outlook to deteriorate, the Fed could pause rate increases or adjust the path of balance-sheet normalization, Mr. Williams said.

“The approach we need is one of prudence, patience and good judgment – the motto of ‘data dependence’ is more relevant than ever,” he said in remarks prepared for delivery to the New Jersey Bankers Association.

“If growth continues to come in well above sustainable levels, somewhat higher interest rates may well be called for at some point. However, if conditions turn out to be less robust, then I will adjust my policy views accordingly.”

The remarks come as Fed policy-makers have signalled a willingness to wait to deliver more rate hikes until they have a better handle on whether slowing global growth and financial-market volatility will undercut an otherwise solid U.S. economic outlook.

In separate appearances in recent days, policy-makers from across the spectrum of views agreed the central bank should pause further rate hikes until it is clear how much the U.S. economy will be held back by larger risks like slowing growth in China and narrower ones such as the continuing budget stalemate in Washington.

Mr. Williams said the challenge facing policy-makers in recent years is that inflation has been too low, not too high, suggesting that rate hikes used to slow price pressures may not be warranted. Mr. Williams said he said expects inflation to be right at the Fed’s 2-per-cent target, with no signs the economy has pressure building in it that would push prices higher despite a strong labour market and rising wages.

But there is, he said, increasing anxiety in the markets about economic growth this year. Since October, when signs emerged that global growth is slowing, financial markets have grown increasingly skeptical the Fed can continue tightening much longer.

The Fed increased interest rates three times in 2017 and four times last year, pushing them up to 2.25 per cent to 2.5 per cent at its final 2018 meeting in December. It is signalling it would probably raise rates two more times this year.

Fed chair Jerome Powell and other U.S. central bankers who pushed the rate increases last year have sought in recent weeks to project a more flexible approach this year.

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