MNI: Fed’s Williams Sees Rates Rising ‘Expeditiously’ In 2022

The Federal Reserve will raise interest rates quickly this year to tamp down brisk consumer demand and combat the highest inflation in 40 years, New York Fed President John Williams said Tuesday.

“I expect the FOMC will move expeditiously in bringing the federal funds rate back to more normal levels this year,” he said in prepared remarks to the Bundesbank. “Our monetary policy actions will cool the demand side of the equation.”

Still, he emphasized monetary policy is not on a preset course, a point emphasized by Richmond Fed Thomas Barkin in an interview last week with MNI’s FedSpeak podcast.

“The ongoing pandemic and war in Ukraine bring a tremendous amount of complexity and uncertainty. We will need to be data dependent and adjust our policy actions as circumstances warrant,” Williams said.

Williams, who as New York Fed chair is also vice chair of the FOMC, said he expects supply chain issues that have been contributing to higher prices to be resolved over time, seeing core PCE inflation rising to 4% this year and then falling to 2.5% in 2023 – in line with the FOMC’s March estimates.

He sees GDP growing 2% this year and the unemployment rate staying near its current historic low level of 3.6%.

“Reducing inflation to our longer-run goal while keeping the labor market strong is the challenge of our time. We have the right tools, and we will use them to meet this challenge,” he said.