A senior Federal Reserve official said on Friday that he expects U.S. economic growth to pick up significantly later this year and in 2014 as the drag from fiscal policy fades.

"I still expect there to be a significant step up later in the year and in 2014, especially as the fiscal restraint on growth steps back," San Francisco Federal Reserve Bank President John Williams told CNBC.

Williams also said the low level of inflation was a concern but that he was comforted that inflation appears to be moving a bit higher, which supported the view that there were temporary factors holding it down earlier this year.