NY Fed President John Williams: Monetary policy is working. Financial conditions have tightened. Spending will slow.
Commodities prices are falling. Supply chains are improving. But that won't be enough because underlying inflation is high wsj.com
Commodities prices are falling. Supply chains are improving. But that won't be enough because underlying inflation is high wsj.com
Williams compares the inflation process to an onion.
Commodities are the outer layer.
Durable goods are in the middle.
But the innermost layer—services and underlying inflation—is a problem that will take time to address, he says.
Commodities are the outer layer.
Durable goods are in the middle.
But the innermost layer—services and underlying inflation—is a problem that will take time to address, he says.
Williams: "The fact is, lower commodity prices and receding supply-chain issues will not be enough by themselves to bring inflation back to our 2% objective."
In other words, Williams is arguing that even as the components of inflation formerly labeled as "transitory" do, in fact, prove to be transitory, underlying inflation will still be too high for the Fed's liking.
Williams sees inflation coming down to 3% by the end of 2023.
Williams sees inflation coming down to 3% by the end of 2023.
Williams also nods to the effects—in financial markets and rate-sensitive sectors—of what the Fed has done so far.
"Broad measures of financial conditions, including borrowing and mortgage rates and equity prices, have become significantly less supportive of spending."
"Broad measures of financial conditions, including borrowing and mortgage rates and equity prices, have become significantly less supportive of spending."
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