Fed's Williams: bond yields reflect weakness abroad, not at home

SAN FRANCISCO (Reuters) - Low yields on U.S. Treasuries, often associated with expectations of slow future domestic growth, are "not about the U.S. economy and the Federal Reserve" but mostly reflect weakness in the global economy, a top Fed official said on Friday.

Global weakness is also a key reason for dropping market-based measures of inflation expectations, San Francisco Fed President John Williams told reporters after a speech. Despite the weakness abroad, he said, the U.S. economy has good momentum, repeating his view that it will likely be ready for a modest interest-rate increase in mid-2015.

Speaking a day after the Swiss National Bank shocked markets by lifting a cap on its currency against the euro, Williams said the Fed's goal is not to surprise markets. If market participants watch the incoming economic data, he said, they will likely be able to anticipate when the Fed is likely to raise rates.

(Reporting by Ann Saphir; Editing by James Dalgleish)