Williams of Faith says the U.S. economy does not yet justify policy change

A senior Federal Reserve official said the U.S. economy is not yet ready for the central bank to start withdrawing its hard-earned money, even if the outlook turns pink.

John Williams, the chairman of the Federal Reserve Bank of New York, made comments on Monday amid a growing sensitivity of the financial markets to Fed policy. Economic forecasts made by central bank officials last week indicated that they expected interest rates to rise in 2023, a year earlier than previously indicated.

Williams said the economy is “improving all the time,” in some of the harshest statements he has made since the pandemic began. But he stressed that the Fed would meet the requirements of the monetary policy framework introduced last August, which sets a big bar for tightening policy.

“It’s clear that the economy is improving at a rapid pace, and the medium-term outlook is very good.

“But the data and conditions have not been advanced enough to change the stance of its monetary policy, which has strong support from the Federal Open Market Commission for its economic recovery.”

The comments were more cautious about the possibility of a rapid policy change since the last FOMC meeting.

Speaking to CNBC on Friday, St. Louis Faith President James Bullard turned a sharp eye sell In US equities, he suggested that the central bank may be willing to raise interest rates as much as next year.

Williams said interest rates will not rise until full employment is reached and inflation rises to 2 per cent and that it was “on track” for some time to moderately exceed that target.

He also said the Fed would not reduce its monthly asset purchases by $ 120 billion until “significant progress” has been made on those fronts.

“When thinking about adjusting attitudes in the future, the FOMC has outlined the conditions and measures that will inform decision-making,” he said.

On Monday, at a ceremony organized by the Official Forum of Monetary and Financial Institutions, a reflection group reiterated the need for the Bullard to start thinking about reducing the Fed’s bond purchases in the face of higher inflation.

Robert Kaplan of the Dallas Faith Chair played a similar tone at the same event.

“It would be healthier to deal with the pandemic and move forward in achieving our goals before it is too late to start adjusting these purchases (Treasury and mortgage-backed values),” Kaplan said.