FXStreet (Mumbai) - The U.S. central bank had wanted to see “some further improvement in the labor market” and be “reasonably confident” that sluggish inflation would move back to their 2 per cent annual target before raising rates. The U.S. Labor Department reported a surge in employment in October, further backing a December rate hike. Most Federal Reserve officials seemed confident that the Fed’s twin goals of full employment and stable two per cent inflation can be met in due course. The Fed continues to be inclined towards a December rate hike, after having kept the interest rates near zero for almost a decade now. The Fed is widely expected to increase benchmark overnight interest rate at its Dec. 15-16 policy meeting. The focus now is on the pace of rate hikes subsequent to the first hike in a decade. William sees rate hike in December if economic indicators continue to impress Like most of his peers, the San Francisco Fed President John Williams also believed there is a "strong case" for a December rate hike provided they continue to get signals that the economy is on track to achieve targets. To back his inclination to hike rate in December he said, “the hiccup we saw in the couple labor reports has reversed” and “we’re seeing other signs the economy’s on a good track.” He also feels inflation is firming up and gradually moving towards the target figure. Williams also said “the inflation data have been consistent with inflation, core measures of inflation having stabilized ...” He however did not forget to attach the pre-condition to the rate hike possibility. He mentioned that the rate hike is certain only if the incoming economy data does not disappoint. "Assuming that we continue to get good data on the economy, continue to get signs that we are moving closer to achieving our goals and gaining confidence getting back to 2-percent inflation... If that continues to happen there's a strong case to be made in December to raise rates." Subsequent rate hikes likely to be gradual Like the Atlanta Fed president Dennis Lockhart, Williams believes that the pace of subsequent rate hikes will be gradual. He said the pace of the rate hikes following the first rate hike in a decade will follow the stair-step pattern predominant in the Fed's last policy-tightening cycle, when it had chosen to increase rates by a quarter of a percentage point at every meeting. Like Lockhart, he feels that subsequent rate hikes will be data dependant. "Since economic data can surprise on the upside and the downside, maybe there will be opportunities to show we are data dependent." Williams feel Fed must be prepared to cut rates into negative territory if required. Williams added that it will benefit the to consider the advantages of maintaining a large balance sheet or lowering interest rates into negative territory in an environment dominated by persistently low rates. According to him, the Fed has less room to lower short-term interest rates in response to economic downturns at a time when the natural interest rates are already very low in the world. The central bank must thus consider possible alternative tools or other solutions. It must be prepared to hit the zero-lower or effective-lower bound more often, “whatever that lower bound may be.” For more information, read our latest forex news.