On Friday (September 29), New York Fed President John Williams said that the Federal Reserve may not raise interest rates again, but will keep interest rates high for some time, so that inflation returns to the 2% target level.
Williams is also the vice chairman of the Federal Open Market Committee (FOMC) and has a fixed vote on monetary decisions, so it is regarded as the "number three" at the Fed.
The Fed has raised rates by 525 basis points since it began the process in March last year, taking the target range for its policy rate to 5.25 per cent to 5.50 per cent.
Williams was scheduled to attend an event in the Long Island area of New York on Friday but canceled due to "urgent family matters," though his speech was still released.
Williams said, "My current assessment is that we are at or near peak levels for the federal funds rate." I expect that we will need to maintain the restrictive stance of monetary policy for some time to fully restore the balance between supply and demand and return inflation to desirable levels."
Williams stressed that as uncertainty about the future remains high, policymakers' decisions will, as always, be guided by data and focused on their goals.
At its rate-setting meeting this month, the Fed left rates unchanged, in line with market expectations, but policymakers said they expected to keep rates at higher levels for longer in 2024 than they had anticipated earlier this year.
Williams believes that while inflation has been moderating, it is still too high. He said imbalances in the Labour market were decreasing, but further reductions in demand were needed.
The U.S. PCE price index climbed 3.5% in August from a year earlier, according to data released Friday by the Bureau of Economic Analysis. Excluding volatile food and energy factors, the core PCE price index rose 3.9 percent in August from a year earlier. The core PCE price index is an inflation measure closely watched by the Fed.
Next year, Mr. Williams expects inflation to fall to 2.5 percent, economic growth to slow to about 1.25 percent and unemployment to rise above 4 percent.