- He is confident US central bank is on right path to lower inflation to 2% target
- Williams acknowledges the issue of high inflation, which disproportionately affects those who can least afford higher prices for food, shelter, and transportation.
- The Federal Reserve is committed to bringing inflation down, with price stability being essential for the economy to reach its full potential and sustain maximum employment over the long term.
- Imbalances between demand and supply persist, leading to high inflation and a tight labor market; some signs of gradual cooling in demand for labor and goods/commodities are present.
- Job growth has been robust, with unemployment rate at a historically low level of 3.4%; labor force participation has rebounded, helping to alleviate some labor market imbalances. Projects unemployment rate to rise to 4% – 4.5% this year
- Inflation remains too high, but has moderated from a 40-year high of 7% to 4.2%; various measures of longer-run inflation expectations remain well anchored at levels consistent with the Fed's 2% longer-run goal.
- Core services excluding housing still show persistent inflation due to imbalances in overall supply and demand; it will take the longest to bring down.
- it will take time for the Fed rate hike's to bring economy back into balance
- Williams expects inflation to decline to around 3-1/4% this year before returning to the longer-run goal of 2% over the next two years; real GDP growth is expected to be modest this year, picking up somewhat next year.
- Monitoring the totality of the data and its implications for the achievement of the Fed's goals is crucial.
Q&A
- The Fed has not said it's done raising rates
- Fed estimating incredible progress on monetary policy
- Fed needs to be data dependent with monetary policy
- Fed will raise rates if needed
- Does not see any reason to cut rates thisyear
- We are not seeing a wage price spiral today
- Fully confident US can get inflation back down to 2%
- Structural shifts will not impair Fed work to hit inflation target
- Recession not in baseline forecast
- Economy has risks to both the up and down side
- Sees signs of further tightening of credit; expects it to affect economic growth
- Tighter credit may blunt how far Fed goes with rate hike's
- Does not see tighter credit knocking economy totally off course
- Wage growth has stabilized at a high level. Wage data suggests labor market is still very strong.
- Banks are sound and resilient and quite strong. Acute phase of stress is about over
The comments do not say one way or the other whether the Fed will tighten or not at the next meeting. They do say, that a rate cut is unlikely this year. This is consistent with other Fed members.
Stocks are little changed but remain down on the day:
- Dow Industrial Average -70 points or -0.21%
- S&P index -18.8 points or -0.45%
- NASDAQ index -76 points or -0.62%
In the US debt market, yields are marginally higher in trades near highs for the day:
- 2 year yield 4.042% +3.1 basis points
- 5 year yield 3.506% +1.0 basis point
- 10 year yield 3.521% unchanged
- 30 year yield 3.838% +0.5 basis points
Click here for the full speech.