New York Fed President John Williams said that although inflation has recently cooled toward the Fed's 2% target, policymakers are still some distance away from achieving their goal.
"Inflation is currently around 2.5% and we have made significant progress in bringing it down," Williams told an event in Mumbai, India, on Friday. "But we still have some way to go to get to 2% sustainably. goal. We are committed to this mission.”
Earlier this week, the New York Fed president said he was "confident" the Fed was on track to achieve its 2% inflation target.
A report last week showed the Federal Reserve’s preferred inflation measure slowed in May, strengthening the case for the central bank to begin easing policy later this year. The so-called core personal consumption expenditures price index (PCE) rose just 0.1% from the previous month, the smallest gain in six months.
Fed officials left interest rates unchanged at their highest level in more than two decades at their policy meeting last month and signaled they expect fewer rate cuts this year than they expected in March. They meet again on July 30 and 31.
Asked about the impact of the Fed’s balance sheet on U.S. stock valuations, Williams downplayed the direct link between the two but noted that Wall Street’s recent performance reflects the state of the economy.
"The market is looking at the U.S. economy, and I guess I can also say the Indian economy, the economy and the stock market are showing pretty consistent strength," he said during a question-and-answer session after his opening remarks.
"In some cases, valuations are indeed a little stretched," he said. "But overall, the market's reaction is a response to a more optimistic future for the U.S.," he said. Global stocks hit record highs ahead of fresh U.S. jobs data on Friday, which is expected to show a slowdown in hiring.
"The economy is doing really well. Unemployment is low, economic growth is good. So I think some of the positive momentum in the market is really based on that," Williams said.
In his speech, Williams stressed the importance of "stably anchored" inflation expectations and noted the "permanent challenges" of measuring the so-called neutral interest rate.
The resilience of the U.S. economy has sparked debate about the so-called long-run neutral interest rate, a level of interest rates that neither stimulates nor suppresses activity.
Williams pushed back against recent comments that the neutral rate has risen since the pandemic. In his speech on Wednesday, he cited neutral rate forecasts that he believes are close to pre-pandemic levels in the U.S. and the euro zone.
Officials raised their forecast for long-term interest rates in June to 2.8%, according to the median forecast, from 2.6% at the March meeting. The increase followed a smaller increase in March.
Non-farm data released on Friday showed that the U.S. unemployment rate rose again in June, but the number of jobs added in the United States in June was again slightly higher than expected. The number of non-farm payrolls in the United States increased by 206,000 in June, which was greater than the expected 190,000. The previous value was revised down from 272,000 to 218,000. The average monthly increase in employment in the previous 12 months was 220,000. The unemployment rate unexpectedly climbed to 4.1%, the highest level since November 2021. The average hourly wage in June increased by 3.9% year-on-year, the smallest increase since 2021.
The article is forwarded from: Jinshi Data
