Fed may raise rates above expectations-Williams
2022.12.16 10:42
Fed may raise rates above expectations-Williams
Budrigannews.com – John Williams, president of the New York Federal Reserve, said on Friday that the United States central bank may raise interest rates more than expected next year. He also said that he doesn’t expect the economy to go into recession as Fed policymakers move forward with measures to control inflation that is too high.
Williams stated in an interview with Bloomberg’s television channel, “We’re going to have to do what’s necessary” to return inflation to the Fed’s 2% target. “Could be higher than what we’ve written down,” he stated, referring to the Fed’s projection this week of a 5.1% federal funds rate for the peak rate next year.
“Inflation has been stubbornly high… and we’ve seen the economy remain very resilient to higher interest rates,” stated Williams, who is also vice chair of the Federal Open Market Committee, which sets interest rates.
Williams, on the other hand, stated, “that’s definitely not my baseline” in response to some Wall Street forecasts arguing that the Fed may need to increase the federal funds rate target by as much as 6% or 7%.
Williams was the first official at the Fed to comment on Wednesday’s anticipated half-point increase in the benchmark overnight interest rate to 4.25 percent-4.50%. In addition, the Federal Reserve forecasted slower economic growth and higher unemployment, as well as revised its estimate of the extent to which it will need to raise interest rates to reduce inflation.
“I wish there were a completely painless way to restore price stability,” said Fed Chair Jerome Powell in his news conference following the conclusion of the policy meeting on December 13-14. Powell acknowledged that the actions he believes the central bank will need to take will pose challenges for the economy. This is the best we can do because there isn’t one.
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Williams stated that he does not anticipate a recession and noted that, in light of the Fed’s current outlook, “I don’t see this as a recession.” Evidently, we are not in a recession at the moment.”
The minutes from the Federal Reserve’s November strategy meeting showed that national bank staff financial experts saw the dangers of downturn against proceeded with development as generally even. In the meantime, on Thursday, the New York Fed stated that its internal economic model predicts flat growth in 2024, a 0.3% decline in overall activity, and a return to growth the following year.
The head of the New York Fed also said that recent inflation data have been better because of better supply chains and other things. However, he said that high inflation in the service sector is still a problem and should be addressed by the Fed. He went on to say that wage gains are high, but they are not enough to cause overall price pressures to rise like they did in the 1970s.
Although Williams asserted that he does not believe the Federal Reserve has lost credibility with markets and the general public, the central bank has come under fire for being too slow to begin raising rates to reduce inflation, which has been at 40-year highs.
Williams stated, “I don’t think we’ve lost the credibility” of being viewed as resolute inflation fighters, adding, “We’re absolutely committed to get inflation back to our 2% goal, and we’re acting in that way.”
Williams added, “I think pretty much everyone understands that real interest rates need to get restrictive and stay there,” when discussing the possibility of a divergence between the market’s and the Fed’s perspectives on the economic future.
