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Fed's Williams: Rates need to rise above 3.5%, no rate cut in 2023 - Financial Markets Worldwide

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Economy1 hour ago (22pm EST on Aug 30, 2022)

© Reuters. FILE PHOTO: New York Federal Reserve Bank President and CEO John C. Williams speaks with the Economic Club of New York in Manhattan, New York, U.S., March 6, 2019. REUTERS/Lucas Jackson

by Ann Saphir and Lindsay (NYSE:) Dunsmuir

(Reuters) – New York Fed President John William The Fed may need to raise its policy rate above 3.5%, and there is no chance of a rate cut next year as it struggles with excessive inflation, Mrs. Smith said on Tuesday.

“From my point of view now, I think we need to maintain a policy stance – keeping inflation down and aligning demand and supply – which will take longer, It will continue into next year,” Williams told the Wall Street Journal. “Based on what I’m seeing in the inflation data, and what I’m seeing in the economy, it’s going to be a while before I expect to see rates lower.”

Fed Chair Jerome Powell made it clear last week that he and other monetary policymakers are prepared to raise borrowing costs as much as necessary to limit growth and push down inflation, which is now three times above the Fed’s 2% target, even though doing so could mean Losing jobs and suffering with families and businesses.

Powell’s No. 2 on the Fed’s decision-making panel, Williams said the Fed’s decision on how much to raise rates next will depend on upcoming data, including Friday A few days before the Sept. 20-21 meeting, the monthly jobs report and consumer price index readings.

It also depends on policymakers’ views on how much higher interest rates will ultimately need to be raised to begin to ease inflationary pressures, he said. He said his own view was that interest rates would need to be “just above” 3.5% to really start to constrain the economy. That’s based on his estimates that inflation, the Fed’s preferred measure of 6.3% in July, could be between 2.5% and 3% next year.

The Fed raised its benchmark federal funds rate to 2.25-2.50% at its last meeting in July.

Williams said it will take the Fed several years to bring inflation down to its 2% target.

“We’re going to need to have restrictive policies for a period of time — it’s not something we’re going to do in a short period of time and then change direction; it’s actually more of a It’s about putting policy in the right place to lower inflation and keep it there” to make it happen.

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