By Harriet Torry 

WASHINGTON -- Federal Reserve Bank of San Francisco President John Williams said Thursday he expects the central bank to raise short-term interest rates three or four times this year, including the increase last week.

"I think the economy is in a good place right now. Growth has been basically a little bit above trend," Mr. Williams told The Wall Street Journal during an interview.

"Three or even four increases as your total makes sense," he said.

He said his projections are "not conditional on something happening," such as whether new government policies stimulate faster growth, but rather on the state of the economy.

He added, however, that if new fiscal policies do spur growth, that would strengthen the argument for four rather than three moves this year.

Mr. Williams said he didn't know when the next rate increases might occur, but added, "Doing them earlier positions monetary policy that if we do get either very positive news on the economy in terms of data or maybe news of significant fiscal stimulus, then you're positioned to move a little bit quicker."

The median expectation of Fed officials is they will lift their benchmark federal-funds rate three times this year, in quarter-percentage-point steps, according to projections released last week. They made their first move of 2017 at their March 14-15 meeting, when they agreed to raise the rate by a quarter percentage point to a range between 0.75% and 1%.

The Fed has boosted its portfolio of long-term bonds and other assets to $4.45 trillion from less than $1 trillion before the financial crisis. The central bank plans to start reducing the portfolio, or balance sheet, at some point but hasn't said when or by how much. Instead, the Fed has said repeatedly it won't begin the process until its rate increases are "well under way" toward an unspecified level. Mr. Williams suggested it would be about 2.5% to 3%.

Fed Chairwoman Janet Yellen has declined to define "well under way," saying it would be based less on a numerical value and more on an assessment of the economy's health and momentum. She said officials discussed the balance-sheet issues at their most recent meeting but made no decisions.

Mr. Williams said Thursday he would like to see a fed-funds rate that is "half way" to its eventual resting level before beginning to wind down the balance sheet. "We're not there yet, but of course if you think about three rate increases this year, that will probably get us closer to there by late this year or around then."

The process of shrinking the balance sheet, should "happen in a gradual and predictable way" over several years, Mr. Williams said.

Stocks have climbed since the November election on hopes that the Trump administration and a Republican-controlled Congress will reduce taxes, cut regulation and stoke economic growth through higher government spending.

Mr. Williams on Thursday reiterated his view that coming tax and spending policies are unlikely to fundamentally change the U.S. economy's prospects.

"A trillion dollars over many years in a $19 trillion economy is not a lot, and it's spread out over a long time," he said, adding "there's too much focus on fiscal stimulus in terms of changing the economic outlook and monetary policy."

Mr. Williams is a close ally of Ms. Yellen, after serving as her research director when she led the San Francisco Fed.

Until a few weeks before the March meeting, many market participants hadn't expected a Fed rate increase this month. Then several officials -- including Mr. Williams and Ms. Yellen -- signaled clearly that they were likely to move.

"There's an idea that we somehow changed our mind, and that one I don't get at all," Mr. Williams said. "My view was that we need to be raising interest rates," and "now we're basically executing on that plan."

"I was admittedly surprised myself that the market put such a low probability...for a March increase," Mr. Williams said Thursday.

Economists surveyed by The Wall Street Journal just before the Fed meeting almost unanimously expected the Fed to raise short-term rates in March, and most thought the next move would come in June.

Write to Harriet Torry at harriet.torry@wsj.com

(END) Dow Jones Newswires

March 23, 2017 15:43 ET (19:43 GMT)