Fed's Williams: inflation is stubbornly high and the Fed still has work to do

New York Fed President John Williams, a permanent voter on the Fed's policy committee, painted a two-sided picture of the US economy in fresh remarks: growth is in good shape, but inflation has not come down.

Economy: resilient, but not overheating

• Growth: the US economy is resilient and growing at a solid pace.
• Strengthening without overheating: the economy is gaining strength but, in Williams's view, is not running too hot.
• K-shaped economy: evidence points to a K-shaped economy, with different parts of the economy performing very differently.
• Investment: all levels of investment respond to changes in interest rates.

Inflation: stubborn and hard to bring down

• Inflation remains too high and has proved stubborn and difficult to bring down.
• The Fed needs to act over time to return inflation to its 2% goal.
• To reach the appropriate policy stance, the Fed still has work to do.
• Key point: the aim of monetary policy is to control inflation, not to lower the overall price level. Trying to push prices down could create bad economic conditions, he said.

Government debt

Williams said the US has the economic tools to manage its debt, but solving the problem requires political will.

Why it matters for markets

The remarks extend the hawkish tone from several Fed officials this week. "Still has work to do" signals the Fed is ready to act further. That kind of message usually supports the US dollar and Treasury yields and weighs on gold and growth stocks. Traders now turn to the next inflation data and the December decision.

Questions? Telegram support @fibonacci_chart

---

Source: remarks by John Williams, President of the Federal Reserve Bank of New York