(Original title: The Fed’s “three hands”: interest rates still need to be raised further to curb inflation, and unemployment will rise significantly)
November 29 News from the Financial Associated Press (Edited by Xia Junxiong)New York Fed Chairman Williams said Monday (November 28) local time that the Fed still has a lot of work to do to reduce inflation, a policy course that is expected to lead to a significant increase in unemployment.
Williams is also a vice chairman of the Federal Open Market Committee (FOMC), enjoys fixed voting rights on monetary policy decisions and is considered the Federal Reserve’s “number three”.
The Federal Reserve has raised interest rates six times this year, including four consecutive 75 basis point rate hikes (June, July, September and November), with a total of 375 basis points of interest rate hikes, raising the Federal Reserve’s interest rate target range at 3.75%-4%, the central bank’s most aggressive rate-hiking cycle since the 1980s.
Williams said: “Inflation is too high and persistently high inflation has undermined our economy’s ability to reach its full potential.” She stressed that the Fed has shown signs of progress in reducing inflation, but more action needs to be taken to bring inflation back to the 2% target level.
October CPI data showed that US inflation could ease. The US CPI rose 7.7% year over year in October, significantly lower than expected, and fell below 8% after seven months, but was still well above the US government’s 2% target. Fed.
“Further monetary policy tightening should help restore the balance between supply and demand and return inflation to 2% in the coming years. Tighter monetary policy has already started to cool demand and reduce inflationary pressures, which it will take some time,” said Williams. But I have full confidence that we will return to a sustained period of price stability.”
The next Fed interest rate meeting is scheduled for December 13-14 local time, and the market generally expects the Fed to raise interest rates by 50 basis points in December.
This was also confirmed by the Fed’s November meeting minutes released last week, which showed that most Fed officials believed they needed to slow the pace of rate hikes after hiking four times in a row by 75 basis points.
Unemployment will rise significantly, Williams says
Williams warned on Monday that while the US economy is unlikely to fall into a recession with rate hikes, unemployment will continue to rise. He said the labor market remains tight, with a large labor gap and rapid wage growth.
October nonfarm data far exceeded market expectations, with a total increase of 261,000 jobs and an unemployment rate of 3.7%.
With moderately positive economic growth this year and next, Williams expects the unemployment rate to rise to between 4.5% and 5.0% by the end of next year. Meanwhile, slower global growth and improved supply chains are helping to reduce inflation.
US PCE, the Fed’s preferred inflation gauge, rose 6.2% year over year in September and Williams expects inflation to fall between 5.0% and 5.5% by the end of 2022 and between 3.0% and 3.5% next year. .
US PCE data for October will be released on Thursday, while nonfarm payrolls and unemployment rate for October will be released on Friday.
