Fed’s John Williams says rates could be increased if inflation doesn’t come down
John Williams, New York Federal Reserve President, said that inflation will take a while to return to an acceptable level after interest rate increases.
He added that he doesn’t expect inflation to return to the Fed’s 2% goal until the next two years. He warned that unemployment is likely to rise to a 4%-4.5% range from its current 54-year low of 3.4%. Williams explained that it will take time for the actions of the Federal Open Market Committee to restore balance to the economy and return inflation to the 2% target.
He also discussed the current problems in the banking industry and how this will factor into his policy outlook. Williams indicated that additional rate hikes are possible if the data doesn’t cooperate but there is no reason to cut interest rates this year in his baseline forecast.
Some positive signs he cited include moderation in longer-term inflation expectations, and a cooling in demand for labor that has heated the jobs market and put upward pressure on wages.