MNI: Fed Has Ways To Go To Sustained 2% Inflation - Williams
New York Fed president says there will likely be bumps along the way to 2% inflation.
New York Fed President John Williams on Wednesday said there's been significant progress in restoring balance to the U.S. economy and bringing inflation down, but there is still a ways to go on the the journey to sustained 2% inflation.
"While we’ve seen great progress toward achieving our goals, the journey is not yet over, and I am very focused on making sure we complete this mission successfully," he said in prepared remarks. Williams, a vice chair of the FOMC, is expecting GDP growth to slow to about 1.5% this year, and the unemployment rate to rise modestly, peaking at around 4%.
"I expect inflation to continue its return journey to 2%, although there will likely be bumps along the way, as we saw in the most recent Consumer Price Index data. To be specific, I expect PCE inflation to be around 2 to 2.25% this year and 2% next year," he said at a at a Long Island Association event, noting risks to his forecast are two-sided. (See MNI: Fed To Stay Patient Amid Bumpy Inflation-Groen)
"We still have a ways to go on the journey to sustained 2% inflation," said Williams, citing progress in the the New York Fed's Multivariate Core Trend model that has fallen significantly, reaching 2.3% in December, reflecting declines in all the major categories of core inflation.
Despite the very real progress in restoring balance, two important indicators point to lingering tightness in the labor market: job openings and wage growth, said Williams.
"Job vacancies, which reached all-time highs in the red-hot labor market of 2022, have trended lower since then, but are still quite elevated relative to pre-pandemic norms, he said. "And while we have seen measures of wage growth come down from their pandemic-era peaks, they remain above pre-Covid averages."