Fed’s Williams says central bank isn’t done with rate hikes yet

The president of the Bank of Federal Reserve from New York, john williamssaid the US central bank has not finished raising its short-term interest rate target, in an interview with the Financial Times published on Tuesday.

“We have indicated through our projections and our communications that we believe we still have some way to go before monetary policy is tight enough for inflation to reach 2%. All this reflects the commitment to achieve price stability not in 10 years, but in a few years”Williams told the newspaper in a transcript of his interview.

Williams did not put in a number of the tightening he expects from the Fed, which last month kept its overnight rate at 5-5.25%, noting that rates are likely to rise another half percentage point over the course of the year. In general, it is considered that the strength of the data will prompt the bank to raise rates again at the end of the month.

Williams said the economy has not yet felt the full impact of previous hikes. “We are still not receiving all the effects of the restrictive policy that we put in place”, he said, adding that “they are still ahead of us, although we have already felt some of the effects in certain interest rate sensitive sectors”.

He also indicated that supply and demand in the labor market are balancing better and that he does not see the country falling into a recession.

“Clearly still a very strong labor market with very good job growth”, said Williams, adding that in terms of labor force participation rates he does not see any weakness. However, he added that there are “definitely signs that things are slowing down in terms of the direction of labor demand”.

Regarding the economic prospects, “I don’t have a recession in my forecasts. I’m pretty slow growing”, he commented.

williams He also said that the Fed’s balance sheet reduction process will continue for some time and did not give an end date.

Source: Reuters