Fed's Williams says central bank has 'work to do' to get inflation back on target
TLT•New York Fed President John Williams said more interest rate increases are likely, but did not specify when or how far rates may rise. Financial markets broadly expect a quarter-point increase in December from the current 3.75% to 4% target range, followed by another in January.
1. More rate increases likely
Williams said the economy is strong, the labor market continues to strengthen and inflation remains persistent. The Fed needs to act over time to return inflation to its 2% goal, he said, adding that monetary policy still has “work to do.”
2. Debate over pace
Stronger-than-expected inflation data has intensified debate over whether the Fed should move more aggressively. Core inflation rose 0.3% in October; Fed Governor Christopher Waller had said that pace could put a 50-basis-point December increase on the table, while Cleveland Fed President Beth Hammack has advocated more modest, steady increases.
3. Prices and cost of living
Williams said the Fed can influence the rate at which prices change, but has little ability to lower the overall price level. Trying to reverse price increases would create “huge distortions and damage to the economy,” he said.
