New York Federal Reserve Bank President John Williams confirmed that the US central bank will likely need to implement further increases in interest rates, as it seeks to reduce high levels of inflation and ensure the stability of the economy, which enjoys overall strength.
Williams did not specify the exact timing for raising interest rates in the coming times or the ceiling for those increases, indicating during an event for the UC Berkeley Alumni Salon held in New York that the economy is still strong, the labor market is strong, while inflation remains present.
Williams explained that the bank will need to take long-term measures to ensure that inflation returns to the target rate of 2% in a sustainable and timely manner, stressing that “there is more work that needs to be done to put monetary policy on the right track.”
In the same context, financial markets generally expect that the central bank will raise the target interest rate range for federal funds – which currently ranges between 3.75% and 4% – by a quarter of a percentage point during the Federal Open Market Committee meeting scheduled for early next December, followed by a new increase in interest rates in January.
Regarding questions about the high costs of living resulting from severe inflation during the last half of the decade, Williams explained that the central bank’s ability remains limited in this regard, indicating that the strategy of central banks over the past decades has focused on maintaining low inflation rates and moving forward, without trying to reverse the effects resulting from wars or the pandemic.
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