Williams says Fed needs to keep interest higher ‘for a few years’ to kill off inflation
The president of the New York Federal Reserve said the central bank needs to maintain “restrictive” interest rates for a few years to make sure high inflation is restored to low pre-pandemic levels.
John Williams said in an interview with the Wall Street Journal that the Fed has a lot more work to do to bring inflation down and restore what economists call price stability. The bank last week raised its benchmark fed funds rate by 1/4 percentage point. Since early 2021 the Fed jacked up its benchmark rate from near zero to a range of 4.5% to 4.75%, a level Williams called “barely restrictive.”
Fed officials have repeatedly said they plan to maintain higher rates for an extended period to make sure inflation is brought down to its 2% target. Inflation rose by less than 2% a year in the decade preceding the pandemic. Williams said the Fed’s path forward will depend on whether the U.S. labor market loosens up and inflation in the large service sector of the economy eases.
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