MNI BRIEF: Williams Says Fed's FAIT Framework Still Needed

New York Fed President John Williams Thursday maintained the fundamentals of the economy have not changed to such a degree that the central bank would back away from its flexible average inflation targeting framework rolled out in August of 2020.

"Those factors are unlikely to change anytime soon," he said. "The fundamental realities of the global economy are still there and so the reasons to set up the new framework, which again was about anchoring inflation expectations at the target, not below the target, and obviously the issues around explaining maximum employment and how that how that fits into our policy strategy. Those are completely relevant for the future as well."

Williams, who also serves as vice chair of the FOMC, said the US is seeing broader-based inflation increases, including shelter prices, with service price rises increasingly becoming part of the story. Supply constraints are a major factor both on the labor market and also on supply chain bottlenecks," he said.