The pace and ultimate peak of the tightening campaign will depend on how the economy performs, according to John Williams, a Bloomberg Federal Reserve Bank of New York President.
The timing of that and how high do we have to raise interest rates will depend on the data, Williams said Friday during a moderated discussion organized by SUNY Buffalo in western New York. The focus is on getting inflation back to 2% and doing that in a way that keeps the economy growing. Williams is a key member of Chair Jerome Powell's leadership team, serving the rate-setting Federal Open Market Committee. The comments from other policymakers have hardened bets that they will forge ahead with their aggressive tightening campaign to curb the hottest inflation in nearly 40 years, which has led to a string of hawkish comments from other policymakers.
Fed officials have been raising interest rates at the fastest pace since the 1980s as they try to sabotage the hottest inflation in a generation. In early November, policymakers are expected to raise their benchmark rate by 75 basis points, for a fourth straight meeting, following data Friday showing unemployment unexpectedly returned to a historic low of 3.5%.
That would bring the Fed's main rate to a range of 3.75% to 4%. Median projections from Fed officials show that rates will go up to 4.4% by the end of the year and 4.6% in 2023. The US central bank hopes that higher borrowing costs will reduce spending and reduce demand for workers, as well as slowing the growth of prices and wages.
Officials say they will include a wide range of economic data at their next meeting on November 1 -- 2, including an update on consumer prices coming next week. Williams said officials will take into account what happens to the global economy.
Williams said that rates are still low by historical standards and that the central bank needs to get its benchmark rate to somewhere around 4.5% over time, so it is no longer boosting spending but restraining it.
The Fed s swift action, which lifted rates by three percentage points since March, has roiled global financial markets and caused the dollar to surge in value against other currencies.
Williams acknowledged that the actions of the Fed had international consequences and said he was in contact with his counterparts at foreign central banks, who also face high inflation. But he stressed that the Fed's domestic goal was to restore price stability.
He said that we are all working on our own to make the decisions to bring the economy back into balance.
The New York Fed chief said he sees US economic growth slowing, but expects it to remain positive next year. He expects the labor market to weaken and the unemployment rate to rise as a result of higher rates.
He believes inflation will come down significantly next year. I think we are on the right path of the economy and I think it will bring inflation down over the next couple of years. No hackers target Eager Homebuyers with a Dumb Scam That Keeps Working.