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- Fed's Williams: 50 bps rate hikes at next two meetings “makes sense” as a base case scenario
Fed's Williams: 50 bps rate hikes at next two meetings “makes sense” as a base case scenario
50 bps rate hikes at the next two Fed meetings "makes sense" as a base case scenario, said NY Fed President and influential FOMC member John Williams on Tuesday, report Reuters. Williams said his view on the neutral rate in the US is for real interest rates to be about 0-0.5% with inflation running between 2-2.5% (suggesting a nominal neutral rate of 2.0-3.0%).
Additional Remarks:
If inflation is higher, an interest rate that adjusts for higher inflation is needed.
You can imagine circumstances where you don't need to go much above that, but that will be decided and we will learn along the way.
Williams said he has no reluctance to raise real interest rates above the neutral level if needed.
The Fed needs to anchor long-term inflation expectations at 2%.
Williams said he is confident inflation can be brought down.
As long as demand is very strong, it’s difficult to resolve supply chain issues.
Asked about the recent stock market rout, Williams said financial conditions haven’t overreacted.
Policy accommodation is being removed quickly via quantitative tightening.
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