By Michael S. Derby
BUFFALO, Sept 29 (Reuters) – Federal Reserve Bank of New York President John Williams said on Tuesday the U.S. central bank has time to weigh the data before deciding when to hike interest rates again, in remarks that said one more increase is likely before the year ends.
“With the policy action we took at our September meeting, there is no need for urgency,” Williams said in the text of a speech prepared for delivery before an audience at the University of Buffalo, in Buffalo, New York. Watching incoming data before deciding what’s next “should provide greater clarity” on how the economy is performing, Williams said.
“If the economy evolves in a manner broadly consistent with my forecast, one further upward adjustment of the federal funds target range may be appropriate late this year to support a timelier return of inflation to target,” Williams said, while adding “that is just my forecast, and time — and the totality of the data — will tell.”
Williams’ pointed comments on the outlook for rates come as financial markets are pricing for the Fed to follow the September rate hike, which lifted the Fed’s overnight target rate range by a quarter percentage point to between 3.75% and 4%, with more increases as the year moves to a close. Futures markets see a strong chance the Fed will hike rates at its October meeting, a notion that Williams appeared to push back on.
In his remarks, Williams said with the economy growing robustly and the job market holding in, price pressures can now be the main focus for monetary policy.
“It is imperative that we return inflation to our 2% target on a sustained basis,” Williams said. “To do so, we must make certain that adverse inflationary disturbances do not become entrenched, and that any second-round effects on inflation remain muted.”
The Fed is raising rates to deal with inflation pressures that have overshot its 2% target for over half a decade. Those pressures have worsened this year on President Donald Trump’s trade tariffs and surging energy prices tied to the war in the Middle East.
Fed officials are increasingly worried inflation will not get back to target in a timely fashion and that action is needed to ensure that the public doesn’t shift toward accepting persistently high inflation as normal.
Williams noted in his remarks that artificial intelligence investment is also helping to drive up price pressures, while adding tariff-related pressures have largely abated so long as the president doesn’t resort to fresh import tax increases.
Williams said he sees inflation ending the year around 3.5% as price pressures ease next year on the way toward getting inflation back to target in 2028.
The official also said in his remarks that he sees growth at 2.25% this year and noted that immigration factors and an aging workforce, coupled with modest productivity levels, limit how high growth can get. Williams also said that he sees the unemployment rate at 4% next year.
(Reporting by Michael S. Derby; Editing by Andrea Ricci)
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