By Ann Saphir and Lindsay (NYSE: LNN) Dunsmuir
(Reuters) – New York Fed President John William The Fed will likely need to raise its policy rate above 3.5 percent, and there is no chance of a rate cut next year as it battles 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 and will It goes on for 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 a rate cut.”
Fed Chairman Jero Powell made it clear last week that he and other monetary policymakers are prepared to raise borrowing costs to the levels needed to limit growth and push down inflation, which is now three times above the Fed’s 2% target, though doing so could mean Families and businesses lose jobs and pain.
Powell’s No. 2 on the Fed’s decision-making group, Williams said the Fed’s decision on how much to raise rates next will depend on upcoming data, including Friday’s monthly Employment data report and CPI readings a few days before the September 21-21 meeting.
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 last raised the benchmark federal funds rate to 2.50-2.50% July meeting.
Williams says 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 for a short period of time and then change direction; it’s really more about putting Policies are put in the right place to bring down inflation and keep it there” to achieve this.