“Inflation is too high”! The “top three” of the Federal Reserve: The Federal Reserve must continue to act to pull the price level back to 2% in a timely manner

The Zhitong Finance App learned that New York Federal Reserve Chairman John Williams, who is the “top three” of the Federal Reserve and has permanent voting rights, said that US inflation is still high, and policy makers must take further action to contain price pressure.

“Inflation is too high. Even the latest data shows that inflation remains high,” Williams said at an event in New York on Thursday evening local time. “We need to gradually introduce policies to ensure that inflation can fall back to the target level of 2% in a timely and sustainable manner.”

At the same time, he said the Federal Reserve must “avoid causing unnecessary damage to the goal of full employment.” Williams also said that overall, the economy does not seem to be unbalanced.

After implementing the first rate hike in three years in September, the Federal Reserve stayed on hold last month, awaiting more clear economic data. Since then, officials have released a broad consensus that interest rate hikes are needed to deal with high inflation, but there are differences of opinion on the pace of interest rate hikes.

Some officials, such as Philadelphia Federal Reserve Chairman Anna Paulson, said this week that “it is appropriate to continue the gradual tightening of the policy.” But Federal Reserve Governor Christopher Waller opened the door for a sharp 50 basis point rate hike as early as next month — provided that October's inflation data was higher than expected — and that was true of the data released shortly after his speech.

The data signal is clear

Williams said the Federal Reserve agreed in September to evaluate upcoming data to “better understand what is happening” before making policy decisions at the next meeting. “We will continue to use this evaluation process,” he said.

“I think the data is sending us a very clear signal — the economy is strong, the labor market continues to strengthen, and inflation is sticky,” he said. “We still have a lot of work to do to adjust our monetary policy to the right position.”

The inflation report released on Tuesday showed that core consumer prices, excluding food and energy costs, rose 0.3% month-on-month in October — higher than expected for the third month in a row. Chicago Federal Reserve President Ostan Goulsby called the data “almost disturbing.”

Interest rate futures currently indicate that investors expect the next three meetings — December, January, and March — to raise interest rates by 25 basis points each.

The job market

Williams is a centrist in the Federal Reserve Policy Committee, and his remarks on economic conditions and policies have received close attention. At a time when Federal Reserve Chairman Kevin Walsh is less open about the likely path of the economy and interest rates, Williams' remarks occasionally drive financial market fluctuations.

“Not only does the US economy continue to grow, it is still gaining momentum,” the New York Federal Reserve Chairman said. “We are also seeing this in the labor market. But we saw no signs that the economy was overheating, and we didn't see any sign that the economy was unbalanced in any way.”

Last week's data showed that employment growth surged in the US in October, and the unemployment rate unexpectedly fell to 4.1%. Overall employment growth in the private sector was the strongest since March.

Speaking about concerns about the size of the US government's borrowing, Williams gave an optimistic view during a panel discussion on Thursday.

“This is not an economic issue for the US,” he said, pointing out that other countries are also dealing with financial concerns, including France, which has experienced riots. “We are growing faster than almost any other country, and we also have this AI boom ahead — which I expect to maintain high and steady growth over the next decade — so we have the economic means to cope with our inherited financial situation.”

“We just need the political will to solve this problem,” Williams said. “That's what makes me hopeful.”

However, the New York Federal Reserve Chairman said that in the short term, the foundations of this strong economy “may be more fragile. If there is a significant economic slowdown, or if the enthusiasm for AI changes, we may see some decline”.