Michael S. Derby
(Reuters) – New York Fed President John Williams on Wednesday cited the relative stability of long-term inflation expectations as good news as the U.S. Central Bank Bank continued efforts to bring price pressure back to expected levels.
“The importance of maintaining well-anchored inflation expectations is a fundamental tenet of modern central banking, but its exact meaning and validation have been left open to interpretation,” Williams said in a speech delivered to Zurich audience. “This news is mostly good news — U.S. long-term inflation expectations have been remarkably stable and broadly in line with [the FOMC’s] long-term goals.”
Williams didn’t say when he was ready Commentary on monetary policy or the economic outlook; he was scheduled to take questions from the audience as part of his appearance.
Williams, who is also the vice chairman of the rate-setting Federal Open Market Committee, also weighed in at a time when the Fed has been aggressively pushing to raise rates to bring down the highest level of inflation in 40 years.
So far, the increase in the Fed’s target rate range, currently between 3.75% and 4%, has not reduced price pressure to 2 % Official target. In recent days, comments from Fed officials following last week’s FOMC meeting have opened the door to the pace of rate hikes at future meetings, while also suggesting the eventual stopping point of the tightening campaign may be higher than policymakers expected. 4.6%. their September meeting.
Federal Reserve officials said they believe the public’s expectations of future price pressures have a large impact on today’s inflation levels. Officials have repeatedly pointed to the relative stability of long-term inflation expectations, which can be measured in a number of ways, as a vote of public confidence that the Fed will return inflation to target at some point.
Williams’ speech discussed multiple ways of measuring inflation forecasts, from market pricing levels to surveys of economists and the wider public. He noted that short-term inflation expectations, which have risen, react most strongly to upcoming inflation data.
Williams also noted that uncertainty over the inflation outlook has risen and that there have been some odd developments. “A surprising issue that deserves further study is the growing divergence in views about future inflation, including the high proportion of expected deflation, and how that bodes well for the future,” he said.
Deflation is an outright drop in price pressures, and it’s a little surprising that some people would worry about the prospect in the face of high inflation and no clear sign of abating.