San Francisco Fed Williams (non-voter) was the last Fed governor who spoke before the FOMC meets next week and debates the fate of its bond purchase programme. Williams is clearly still in the camp of those that want the Fed to start tapering its purchases. He said recent labour data are in line with the gradual improvement and added that the Fed is closer to a substantial labour market improvement, the condition the Fed puts forward to reduce and end purchases. “Job growth has been good”. So, governor Williams is not concerned about the somewhat disappointing August payrolls report. He expects GDP growth to continue to pick up. Williams suggested that the costs of the purchase programme have been mounting as time passed and are a reason to start tapering. He said policy sometimes may unintentionally create asset price bubbles in unpredicted ways (by economic models). Some investors assume that the Fed would do QE indefinitely. He acknowledged that markets showed “froth” prior to Fed tapering talk and called this talk healthy. He sees the tapering as a multi-step process. On the question of the lift-off date for the Fed fund target rate, he sees an increase in official rates not likely before the second half of 2015. Currently the FF future curve suggests such a first increase in official rates in early 2015. So, the main issue for the Fed will be to start tapering purchases, but at the same time convince markets they are wrong with the timing of their rate hike expectations.