Federal Reserve Bank of New York President Williams (John Williams) said on Thursday (1st) that some forward-looking indicators do show that inflation is changing. There is a long way to go.
“I still think we have a long way to go in terms of what the target for the federal funds rate is and how we’re going to get to a sufficiently restrictive stance next year,” Williams said in an interview with Fox Business Network. The view is that we need the fed funds rate to be higher than the rate of inflation, the former has to be higher than the latter, basically to put downward pressure on inflation.”
But when it comes to inflation, he believes that there are indeed some signs that inflation is moving in the right direction.
“Commodity prices have come down, we’re finally seeing some used car prices coming down, including rent, we’re seeing some forward-looking indicators that inflation is moving,” he continued.
According to data released by the US Department of Commerce on Thursday, the core personal consumption expenditures (PCE) price index increased by 6% year-on-year in October, lower than the 6.3% in the previous month, and inflation showed signs of cooling.
Williams expects U.S. inflation to fall sharply next year, but also warns that it may take 2025 to return to the central bank’s 2 percent target.
He said: “The Fed’s job is to slow demand and bring it into balance with supply, including the labor market, and tightening monetary policy is part of that. Inflation, we’re a long way from that level.”
The market generally expects that the Fed will raise interest rates by 2 yards this month, bringing the benchmark interest rate to around 4.4%. The latest interest rate forecast will be released after the meeting. Fed Chairman Jerome Powell said a few days ago that the terminal interest rate may be slightly higher than the 4.6% forecast in September.