By Ann Saphir
SAN FRANCISCO (Reuters) - U.S. inflation will likely still be "well below" the Federal Reserve's 2-percent target next year, but that won't stop the central bank from raising interest rates, a top policymaker said on Friday.
"I would say at this point that June 2015 seems like a reasonable starting point for thinking about when liftoff could happen," San Francisco Federal Reserve Bank President John Williams, who will rotate next year into a voting spot on the Fed's policy-setting committee, told Bloomberg Radio.
The Fed has kept interest rates near zero for six years, and Williams and other Fed officials had previously said they want to see signs of inflation moving back toward their 2-percent goal before lifting rates.
But a dramatic drop in oil prices has put downward pressure on prices and looks set to deliver a boost to consumer spending, so Fed officials are backing away from that earlier judgement.
"You have to look through the short-term fluctuations of things, look to the next year or two ahead and think about where is the economy going to be," he said. "Monetary policy as we know takes a year or two to have its full effects."
That means, he said, the Fed will probably be raising rates even before core inflation - often considered a gauge of future headline inflation - rises back to 2 percent.
Better-than-expected jobs growth will bring the U.S. economy to full employment by the end of next year, Williams projected, adding that he sees early signs of a pickup in wage growth.
The Fed on Wednesday said it would be "patient" in raising rates next year, a term that Fed chair Janet Yellen said means rates will stay at their near-zero level for at least the next two policy-setting meetings.
Williams, typically seen as a centrist whose views are in line with those of Yellen, said the language was meant to suggest the Fed is closer to raising rates, but not in the next few months.
Williams projected 2.5 percent to 3 percent growth for the U.S. economy next year, adding that such above-trend growth is possible "even if conditions abroad weaken further."
And while downside risks from Europe, Japan, and emerging markets could impact the timing of the Fed's first rate hike, he said, more importantly it could impact "the pace at which we tighten."
(Reporting by Ann Saphir; Editing by James Dalgleish and Chizu Nomiyama)