The Fed is on track, but inflation is still far from target

On January 10, President of the US Federal Reserve (Fed) branch in New York John Williams said that it is still too early to call for an interest rate cut when the bank still has a long way to go to bring inflation back to the 2% target.

'Tuyên chiến' với lạm phát, Fed sẽ nâng lãi suất chuẩn lên trên 4%?

At their December 2023 meeting, Fed officials maintained their interest rate target at 5.25-5.5%. (Source: Alamy)

Speaking at the Bronx EDC and BICNY Regional Economic Outlook 2024 Conference in White Plains, New York, Williams said the Fed has seen progress in restoring balance to the economy and reducing inflation. However, the bank’s work is not done.

The Fed will likely need to maintain a tight monetary policy stance for some time to fully achieve its goals and will only ease policy when inflation moves closer to its 2% target, he said.

"The economic outlook remains 'highly uncertain'. Monetary policy decisions will be made at each meeting, based on incoming economic data, the evolving outlook and the balance of risks," he stressed.

At their December 2023 meeting, officials maintained their interest rate target at 5.25-5.5%, while hinting at a rate cut in 2024 amid speculation that easing inflation pressures would continue to ease back toward the 2% target.

The meeting has prompted markets to re-evaluate the likelihood of a rate cut in March 2024, a view many investors still hold, even as some central bank governors have argued in recent weeks that it is too early to say when a rate cut might come.

The New York Fed president predicts inflation will fall to 2.25% this year and 2% in 2025. According to him, the Fed is clearly on the right track, but still far from its price stability goal.

“Unemployment could rise to 4% in 2024,” he added.

Source