Federal Reserve key rate will need to be restrictive 'for some time': NY Fed's Williams

Rob Kim

The Federal Reserve’s key interest rate needs to be “somewhat restrictive” to get demand more balanced with supply, said New York Fed President John C. Williams during a Q&A hosted by the Wall Street Journal. “We’re not there yet,” he added.

In July, the central bank raised the federal funds rate target range by 75 basis points for a second time, bringing the range to 2.25%-2.50%. On Friday, Fed Chair Jerome Powell repeated that “another unusually large increase could be appropriate” at its next September meeting. (Added at 11:29 AM ET)

That means raising the rate to above the real neutral rate — the point at which rates neither fuel nor hinder the economy, while the “real” part means subtracting inflation from that number.

There will be a time when the policy action will change. The Fed will get to the point where smaller hikes may be appropriate, depending on the data.

“We’re going to need to have restrictive policy for some time,” he said. His baseline view is restrictive policy will be required through 2023.

Event ended at 11:32 AM ET.

Earlier, Richmond Fed’s Barkin said he sees a path to control “post-war-like” inflation that the U.S. is facing.

Leave a Reply

Your email address will not be published. Required fields are marked *