New York Fed President "Did Not Say Rate Hikes Are Over"

John Williams, president of the New York Federal Reserve Bank (NY Fed), considered the third most influential figure in the U.S. Federal Reserve (Fed), stated on the 9th (local time) that "I did not say that the rate hikes are over." This signals that rate increases could happen at any time depending on future inflation indicators.

[Image source=Reuters Yonhap News]

According to the economic media CNBC, Williams said at the New York Economic Club that "due to policy lags, it will take time for the Federal Open Market Committee (FOMC) actions to restore economic balance and bring inflation back to the 2% target." Williams predicted that inflation will take at least two years to approach the Fed's target. He also emphasized that if inflation does not ease, the Fed has the option to raise rates at any time.

This statement came less than a week after the Fed raised the benchmark interest rate by 0.25 percentage points to 5-5.25% at the May FOMC meeting. At that time, the Fed hinted at the possibility of holding rates steady in the future through its monetary policy statement.

Williams, who holds a voting right at this year’s FOMC, forecasted that policy decisions will be made based on incoming data. In a Q&A with CNBC after his speech, he said, "First, we did not say that rate hikes are over," adding, "We will certainly do what is necessary to achieve the (inflation) target and will make decisions based on data about what is happening in the economy." He further indicated the possibility of additional hikes if the data does not support easing, stating, "In my baseline forecast, I have not found a reason to cut rates this year."

He also confirmed that he is closely monitoring concerns about the banking sector crisis, including the Silicon Valley Bank (SVB) incident, and its aftermath. Williams explained, "I will particularly focus on assessing changes in credit conditions and how this affects growth, employment, and inflation outlook." However, he added that the labor supply issue, which was considered a major inflation factor, has "improved significantly."

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