New York Fed President expects US inflation to slow this year

The wave of rising prices in the United States that has hit consumers in recent months should subside this year as supply and transportation problems are resolved, a senior Federal Reserve official said on Friday. )

New York Fed President John Williams said he expects inflation to fall to 2.5% this year, but warned that the COVID-19 pandemic makes any forecast face great uncertainty.

Given the rapid recovery and high inflation, he admitted that the Fed is getting “approaching a decision” about rising interest rates.

With inflation hitting its highest rate in nearly 40 years, the Fed has already begun to unwind the massive stimulus injected into the world’s largest economy to aid recovery during the pandemic.

Many economists now expect the Fed’s Federal Open Market Committee (FOMC), which sets monetary policy, to raise the benchmark interest rate from zero in March, with three or even four hikes possible this year.

However, Williams clarified that the date will depend on how the recovery progresses.

“With growth slowing and supply constraints gradually resolving, I expect inflation to fall to around 2.5% this year, much closer to the FOMC’s 2% long-term target.”, he said in a speech before the Council on Foreign Relations.

“And looking ahead, I expect inflation to approach 2% in 2023.″ he added.

The main factors behind the price increase are high demand and supply chain bumps due in part to lockdowns in Asia that have hampered the production of key material.

While expecting the situation to gradually resolve itself, the Fed official warned that the pandemic is unprecedented and the wave of the omicron variant continues to pose challenges for businesses and households.

“As we turn a page into the new year, it is clear that we are not yet at the end of this pandemic story.”, he indicated.