Latest News by Industry
• Williams did not address whether he favors a 75 basis-point rate hike
• He forecasted jobless rate to increase to above 4% sometime in 2023
US economic growth could fall below 1% this year and remain slow through the next year as the central bank acts “resolutely” to curb inflation, New York Federal Reserve President John Williams said on Friday.
“Inflation is sky-high, and it is the number one danger to the overall health and stability of a well-functioning economy,” Williams said in prepared remarks for delivery at a campus of the University of Puerto Rico.
“I want to be clear: this is not an easy task. We must be resolute, and we cannot fall short,” reiterating the increasingly strong language that Fed Chair Jerome Powell has been using to characterize resolution to lower inflation from its current multi-decade high to the Fed’s 2% target.
Although Williams did not address whether he favors a 75 basis-point rate hike at the Fed’s upcoming July meeting, several of his colleagues have already endorsed it.
Atlanta Federal Reserve Bank President Raphael Bostic on Friday said he “fully” supports another three-quarter of a percentage point interest rate hike.
Last month, the Fed raised its short-term benchmark interest rate by 75 basis points, the biggest rate hike since 1994, throwing the rate between a range of 1.5% and 1.75%.
Williams said further increases will now depend on “how the economy responds to tightening financial conditions and how inflation, inflation expectations, and the economic outlook evolve.”
New inflation data will be released next week, but as of May, the consumer price index (CPI) soared 8.6%, the highest level in more than 40 years, with surging costs for shelter, gasoline and food prices contributing to the increase.
Williams said his growth outlook for this year is below 1%, putting it at the low end of Fed officials’ recent projections.
A projected rebound to 1.5% next year would still leave the growth rate below trend.
That should help ease the pressure on prices. But it will also likely raise the unemployment rate, he said.
The strong June jobs report let the jobless rate at 3.6% for the fourth month in a row. Williams said he expected that to increase to above 4% sometime in 2023.
Picture Credit: NYTimes
ALSO READ: