Global Courant 2023-05-09 21:58:55
John Williams, Chief Executive Officer of the Federal Reserve Bank of New York, speaks at an event in New York, November 6, 2019.
Carlo Allegri | Reuters
NEW YORK — New York Federal Reserve President John Williams warned Tuesday that it will take some time for rate hikes to work their way into the economy before inflation returns to acceptable levels.
The central bank official did not forecast where he sees policy going, but said he does not expect inflation to return to the Fed’s target of 2% until the next two years.
He added that unemployment is likely to rise to a range of 4%-4.5%, from its current 54-year low of 3.4%.
“Because of the lag between policy actions and their effects, it will take time for the (Federal Open Market Committee’s) actions to rebalance the economy and bring inflation back to our target of 2%,” Williams said in prepared remarks. at the Economic Club. from New York.
Williams was speaking six days after the FOMC voted to raise benchmark rates another quarter of a percentage point to a target range of 5%-5.25%. In its post-meeting statement, the commission hinted it could pause rate hikes, though it said officials will consider several factors when determining how to proceed.
The committee removed a key sentence from the statement that had indicated additional rate hikes would be appropriate. Williams said that decision is now a matter of what the incoming data says.
“First of all, we haven’t said we’re done raising rates,” Williams told CNBC’s Sara Eisen during a Q&A session after his speech. “We’re going to make sure we’re going to meet our goals and we’re going to assess what’s happening in our economy and make the decision based on that data.”
“I don’t see any reason in my baseline forecast to lower interest rates this year,” he said.
Current problems in the banking sector and their impact will play a role in Williams’ policy outlook, he said.
“I will mainly focus on assessing the evolution of credit conditions and their effects on the outlook for growth, employment and inflation,” said Williams.
Some positive signs Williams mentioned include moderation in longer-term inflation expectations and a cooling in demand for labor that has heated up the job market and put upward pressure on wages, which nevertheless have not kept pace with the rise in wages. the cost of living.
He also said congested labor chains, which have been a major contributor to inflation, have “improved significantly” over time.
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