New York Fed's Williams warns of a 'ways to go' before interest rates are high enough
New York Fed chief sees inflation dropping substantially next year
NY Federal Reserve president expects ‘pretty significant decline’ in inflation in 2023
New York Federal Reserve President John Williams provides expert analysis of the U.S. economy and the extensive measures the Federal Reserve has taken to alleviate inflation.
New York Federal Reserve President John Williams said on Thursday that interest rates need to rise further and stay high in order to crush stubbornly high inflation.
"It will depend on how the economy performs, how inflation performs, next year, but I definitely see us having more work to do," Williams said during an interview with FOX Business' Edward Lawrence. "We still have a ways to go beyond whatever we will do in our upcoming meeting this month in order to get to that sufficiently restrictive stance. Exactly what that means, it's going to depend on the data."
The Fed has been raising interest rates at the most aggressive pace since the 1980s as it tries to wrestle inflation that is still running near a 40-year high under control. Officials have already approved six straight increases, including four back-to-back 75-basis-point hikes, raising the federal funds rate to a range of 3.75% to 4%.
They are widely expected to approve a 50-basis-point rate hike when they next meet on Dec. 13-14, moving interest rates further into restrictive territory.
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Jerome Powell, chairman of the US Federal Reserve, from right, Lael Brainard, vice chair of the board of governors for the Federal Reserve System, and John Williams, president and chief executive officer of the Federal Reserve Bank of New York, durin (Photographer: David Paul Morris/Bloomberg via Getty Images / Getty Images)
Policymakers will also release their first quarterly forecasts since September, providing insight into where they see the U.S. economy headed over the next few years.
Williams said that inflation could remain elevated until 2025, though he anticipates a "pretty significant decline" in consumer prices in 2023 as supply chain disruptions continue to fade.
"It's going to take a couple of years to get all the way" to the Fed's target goal of 2%, he said. Inflation using the Fed's preferred measurement, the personal consumption expenditures price index, climbed 6% in October from the previous year, according to new data released on Thursday.
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"We’re seeing some forward-looking indicators that inflation is turning," he said. "We’re moving now, and into next year, with a lower inflationary trend."
The New York Fed chief's comments came one day after Chairman Jerome Powell signaled the U.S. central bank will slow its interest rate increases at its meeting next month, but stressed that policymakers have more work to do in order to crush stubbornly high inflation.
Federal Reserve Chair Jerome Powell speaks during a news conference on interest rates, the economy and monetary policy actions, at the Federal Reserve Building in Washington, D.C., on June 15, 2022. (Photo by Olivier Douliery/AFP via Getty Images / Getty Images)
"The time for moderating the pace of rate increases may come as soon as the December meeting," Powell said Wednesday during a speech at the Brookings Institute in Washington, D.C. "Given our progress in tightening policy, the timing of that moderation is far less significant than the questions of how much further we will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level."
Still, he noted that "ongoing increases will be appropriate" and stressed that the focus on rate hike speed is less important than the question of how long rates should be held in restrictive territory.
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A majority of traders expect the Fed to approve a smaller half-point rate hike at the conclusion of the central bank's two-day meeting in December, with just 20% forecasting another 75-basis-point increase.
Smaller rate increases will afford the Fed more time to examine how tighter monetary policy, which works with a lag, is impacting the economy.