Williams’ remarks support pricing for a December hike and the dollar’s rate advantage, keeping front-end Treasury yields firm. His emphasis on acting “over time” and on a steady, data-led approach suggests no urgency for a half-point move, which may limit how far bets on a larger hike can build. The comments add to pressure on gold, which has been falling as hike expectations push up real yields. Higher-for-longer messaging also keeps oil-driven inflation risk at the centre of the policy outlook.
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Williams says the Fed has more tightening to do but suggests a steady pace, which supports a December hike without adding much to bets on a bigger move.
Summary:
- New York Fed President Williams says inflation is too high and stubbornly persistent
- He says the Fed will need to act over time to bring inflation back to its 2% target
- In his view, the Fed still has work to do to get monetary policy to the right place
- He describes the US economy as resilient, with strong growth, getting stronger but not overheating
- He says the Fed has been collecting data at a steady cadence
- The remarks follow this week’s hotter-than-expected October CPI and come ahead of the 9 December Fed decision
New York Fed President John Williams said inflation remains too high and the Federal Reserve still has work to do to get monetary policy to the right place, reinforcing expectations that the central bank will keep raising interest rates. Speaking on a panel at a UC Berkeley alumni event in New York on Thursday evening (2330 GMT), Williams described inflation as stubbornly persistent. He said the Fed will need to take action over time to bring it back to its 2% target.
Williams was confident about the economy. He said it has been resilient and growth has been strong, and that the US economy is getting stronger but is not overheating. That combination matters for the policy debate. A solid economy gives the Fed room to tighten further without tipping growth into reverse, while the absence of overheating suggests he does not see a need to rush.
He also said the Fed has been collecting data at a steady cadence, language that points to a methodical, meeting-by-meeting approach rather than a sudden change of pace. His comment that action will be needed “over time” suggests he supports continued, gradual tightening.
The remarks come two days after a hotter-than-expected October consumer price report. Headline prices rose 0.4% on the month and core prices 0.3%, both above forecasts. Since then, markets have priced a high probability of a quarter-point hike at the Fed’s 9 December decision, along with an outside chance of a half-point move. Fed Governor Christopher Waller has said he would favour a quarter-point hike in December and could prefer a larger step if inflation runs hotter than expected.
In the comments reported, Williams did not commit to a specific move in December. But he is a permanent voter and vice chair of the Federal Open Market Committee, so his views carry significant weight. His message is also in line with his remarks in Frankfurt a week earlier, when he called inflation far too high.
For markets, the comments support the case for a December hike without encouraging bets on a larger move. The next test is the data due before the meeting, especially further inflation readings, which will decide whether “over time” means one hike or several.
December pre-Christmas rate hike coming up!
This article was written by Eamonn Sheridan at investinglive.com.