According to New York Fed leader John Williams, the U.S. Federal Reserve shouldn’t be so quick to cut off support to the still-recovering economy, the Wall Street Journal (WSJ) wrote Monday (June 21).
His comments, as he spoke at a virtual event on Monday (June 21), came as the rate-setting Federal Open Market Committee (FOMC) meeting last week ended with the decision to hold the short-term interest rate target at near zero as it has been since March 2020.
However, the meeting also saw officials looking upon the market with optimism. That led to the commission moving forward on the timeline on when it might raise rates. According to WSJ, that might happen by 2023.
Two other Fed officials, Robert Kaplan of the Dallas Fed and James Bullard of the St. Louis Fed, spoke prior to Williams. They had said the deadline for the central bank changing its strategy is getting closer — if it hadn’t already passed.
In addition, the FOMC also said there could be a door open for pulling back on the bond-buying stimulus.
“It’s clear that the economy is improving at a rapid rate, and the medium-term outlook is very good,” Williams said, per WSJ. “But the data and conditions have not progressed enough for the [Federal Open Market Committee] to shift its monetary policy stance of strong support for the economic recovery.”
According to WSJ, Williams said the recovery process had been rocked by numerous shifts and disruptions, with inflation up due to supply bottlenecks and shortages. Inflation could rise to 3 percent this year, but it is predicted to abate to 2 percent, the Fed’s target, by next year.
In early June, the Fed said the economy was doing moderately well, with vaccines and the easing of social distancing marking betterment.
However, there were still supply chain disruptions that were holding the economy back, they said, with shortages of materials and labor.