The Fed will continue to press forward with actions aimed at cooling demand, in a bid to help lower inflation back to the Fed’s 2% target
Federal Reserve Bank of New York President John Williams said on Monday that while there have been nascent signs of cooling inflation, underlying price pressures remain too high, which means the U.S. central bank must press forward to get inflation under control.
Williams, who also serves as vice chairman of the Fed’s interest rate-setting Federal Open Market Committee, did not offer a view about what’s next for monetary policy. But he said the Fed will continue to press forward with actions aimed at cooling demand, in a bid to help lower inflation back to the Fed’s 2% target. Inflation was at 6.2% in August compared with the same month a year ago.
The Fed has raised its overnight target rate range aggressively this year, rising from near zero levels in March to the current range of between 3% and 3.25%. Officials have pencilled in more rate rises over the course of this year and into next year, which could lift the funds rate to around 4.6% by next year, based on forecasts released by the Fed at its policy meeting last month.
Many market participants are questioning the need for rate rises, however, out of fears Fed action will break something in financial markets and send the economy into recession. Others reckon the economy has already seen the worst of the inflation surge and that price pressures are set to ebb of their own accord.
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