John C. Williams, President of the Federal Reserve Bank of New York, recently spoke at the Housatonic Community College in Connecticut, addressing concerns over inflation and the economic outlook. Williams stated that he expects inflation to decline to around 3.25% this year, before moving closer to the Federal Reserve's longer-term goal in the next two years. He noted that the anchoring of inflation expectations is important for achieving and sustaining price stability, and that longer-run inflation expectations have remained well anchored at levels consistent with the Federal Reserve's 2% goal.
While Williams expects real GDP to grow modestly in 2023 and to pick up next year, he acknowledges that the economic outlook is uncertain and that the Federal Reserve's decisions will be driven by the data. He believes that slower growth and tighter monetary policy will likely lead to some softening in the labor market, with unemployment gradually rising to about 4.5% over the next year.
Williams emphasized that the Federal Reserve's policy decisions are based on achieving maximum employment and price stability mandates, and he expressed confidence that their actions will bring inflation down to their longer-term goal of 2%. He acknowledged, however, that lags exist between policy actions and their effects, and that it will take time for all of the inflation gears to move at a pace that takes the Federal Reserve to its target.
Williams reassured the public that the Federal Reserve is closely monitoring economic developments and is ready to adjust their policy if necessary to achieve their goals.
