Federal Reserve "No. 3" official and New York Fed President John Williams has sent a hawkish signal, stating clearly that inflation remains too high and that there is still work to be done in adjusting monetary policy, while emphasizing the need for further action to ensure inflation returns to the 2% target in a timely and sustained manner.
Speaking at an event in New York on the evening of Wednesday, November 12, Williams said, "The inflation rate is too high, and the latest data still show inflation running high." He further noted, "Over time, we need to take action to ensure inflation returns to our 2% target in a timely and sustained manner." He also stressed, "We still have a lot of work to do in getting monetary policy to the right place."
Williams' remarks this time were more explicit than before. He had previously expressed support for the Fed first gathering information before determining its policy stance, whereas this speech added a clear signal of the "need for further action." Given that Fed Chairman Kevin Warsh has recently spoken less publicly about the policy outlook, Williams' remarks as a permanent FOMC voting member have drawn close market attention.
Data signals are clear, inflation stickiness is prominent
Williams said the Fed reached a consensus in September to assess upcoming data to gain a clearer understanding of the "current situation" before making a policy decision at its next meeting.
"I think the data are sending us a very clear signal — the economy is strong, the labor market continues to strengthen, and inflation is showing stickiness."
As previously mentioned in Wallstreetcn articles, inflation data released this Tuesday showed that U.S. core CPI, which excludes food and energy costs, rose 0.3% month-on-month in October, exceeding expectations for a third consecutive month.
Economy strong but not unbalanced, employment constraints cannot be ignored
Williams' assessment of the current economic situation is generally optimistic. "The U.S. economy is not only continuing to grow, it actually appears to be strengthening," he said. "We see that in the labor market as well. But we don't see signs of the economy overheating, nor do we see signs of the economy becoming unbalanced in some way."
At the same time, Williams also set boundaries for policy tightening. He emphasized that the Fed must "ensure it does not cause unnecessary harm to the maximum employment mandate," balancing labor market stability while advancing its anti-inflation efforts.
Multiple officials release hawkish signals in quick succession
Williams' remarks are part of a concentrated wave of hawkish signals from Fed officials recently.
Since the start of this week, several Fed officials, including Dallas Fed President Logan, Fed Governor Waller, Kansas City Fed President Schmid, and Fed Governor Bowman, have all released hawkish signals in their speeches, arguing that U.S. inflationary pressure remains stubborn and monetary policy still needs further tightening.
Among them, Fed Governor Waller even expressed a more aggressive view on the pace of rate hikes — if inflation remains elevated, rates should be raised by 50 basis points in December, and the previous "three precautionary rate cuts" need to be reversed.
Currently, interest rate futures show that investors expect the Fed to raise rates at each of its next three meetings.
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