Williams issues another hawkish warning: inflation is "far too high," and the Federal Reserve has a lot of work to do
*Author: Jin Ten Data, Financial Media*
John Williams, President of the New York Federal Reserve, stated on Thursday local time that U.S. inflation remains too high, and the Federal Reserve needs to take further action to ensure prices consistently return to the 2% policy target.
Williams said during an event in New York that evening: "The level of inflation is far too high, even based on the latest published data, it remains elevated. We need to take appropriate measures in the coming period to ensure that inflation can timely and sustainably return to the 2% target level."
However, he also emphasized that the Federal Reserve must avoid causing unnecessary harm to the full employment goal. He believes that, overall, the U.S. economy does not currently appear to be out of balance.
The Federal Reserve implemented its first interest rate hike in three years in September, and then decided to maintain interest rates in the October meeting to await more economic data. Since then, officials have gradually formed a broad consensus: to curb persistently high inflation, interest rates still need to be raised further, but there are still internal disagreements on the specific magnitude and pace of rate hikes.
### Inflation Data Strengthens Rate Hike Expectations, Officials Have Divergent Views on Pace
Williams stated that the Federal Reserve decided in September to further understand economic trends by assessing subsequent economic data and then determine monetary policy at the next meeting. He said, "We will continue to proceed according to this process."
However, he believes that recent data has sent quite a clear signal: the U.S. economy remains strong, the labor market continues to strengthen, and inflation remains stubborn. Williams stated, "We still have a lot of work to do to get monetary policy back to the appropriate position."
The U.S. October inflation report released on Tuesday showed that the core Consumer Price Index (CPI), excluding food and energy prices, rose by 0.3% month-on-month, exceeding market expectations for the third consecutive month.
This report further reinforced the judgment that the Federal Reserve needs to continue tightening policy. Austan Goolsbee, President of the Chicago Federal Reserve, described it as "disturbingly critical."
However, Federal Reserve officials still have differing views on the intensity of rate hikes. Anna Paulson, President of the Philadelphia Federal Reserve, stated this week that "further gradual tightening of monetary policy seems appropriate at this time."
In contrast, Christopher Waller, a Federal Reserve Governor, left room for larger rate hikes. He previously stated that if the October inflation data exceeded expectations, the Federal Reserve might consider a one-time rate hike of 50 basis points as early as December, rather than the usual 25 basis points. The subsequent inflation data indeed exceeded expectations.
### Rate Futures Bet on Three Consecutive Rate Hikes
Currently, market expectations for the Federal Reserve's subsequent policy path have clearly shifted to a hawkish stance. Rate futures indicate that investors expect the Federal Reserve to raise rates by 25 basis points at each of the next three meetings (December, January next year, and March).
Williams is a centrist on the Federal Reserve's monetary policy committee, and his statements regarding economic conditions and interest rate policy have always been closely monitored by the market, sometimes even directly influencing financial market trends.
Especially after Federal Reserve Chairman Kevin Warsh reduced public discussions on economic conditions and future interest rate trends, Williams' policy statements have attracted more attention from investors.
As inflation continues to exceed expectations, the policy pressure facing the Federal Reserve is increasing. Moving forward, the market will focus on whether other officials will further support consecutive rate hikes and whether the economic data released before the December meeting can reinforce this policy path.
### Several Federal Reserve Officials Release Hawkish Signals
Mary Daly, President of the San Francisco Federal Reserve, stated on Thursday that to lower inflation, the Federal Reserve may need to raise rates further.
Daly said at an event held at the Stanford Institute for Economic Policy Research in California: "My inclination is that further tightening of monetary policy will be necessary, as we see inflation continuing to face pressure, and this pressure is not just coming from industries most directly affected by tariffs or oil prices." She noted that she is hearing more and more businesses say that due to rising input costs, they will have to pass higher costs onto consumers.
Daly also discussed the impact of artificial intelligence and its future development prospects. She stated that there is no doubt that AI infrastructure construction is driving up price pressures, but the current impact on overall inflation is still limited, as the related cost increases are not large enough and have not spread to other areas.
Daly stated, "This only indicates that other factors are currently driving overall inflation up, rather than AI-related products." She reiterated her optimistic view on the long-term impact of artificial intelligence driving faster productivity growth, but it is still too early to determine when this impact will truly manifest.
Daly does not have a vote on monetary policy this year, but she reiterated her support for the Federal Reserve's previous interest rate decisions.
Also on Thursday, Austan Goolsbee, President of the Chicago Federal Reserve, Beth Hammack, President of the Cleveland Federal Reserve, and Jeff Schmid, President of the Kansas City Federal Reserve, each expressed their concerns about persistently high inflation.
Hammack, speaking at an event in Columbus, Ohio, stated: "My expectation is that we need to shift monetary policy to a restrictive stance to help bring down inflation." She mentioned that if the Federal Reserve falls behind the situation in combating inflation, officials could consider taking more aggressive actions, but she currently does not believe it is necessary to do so.
Goolsbee, in an interview with Yahoo Finance, stated that AI infrastructure construction may be exacerbating inflationary pressures in the economy, putting the Federal Reserve into a phase where inflation is more difficult to suppress. Schmid stated that the Federal Reserve has not yet defeated the enemy of inflation.