John Williams, Interview: Bloomberg Markets

Fed Funds

“Well, I think we’re well on our way there, and I think when you look at the central tendency of the dots, my colleagues expect the Fed funds rate to get to, say, 5% to 5.5% next year. I think that gets us into that hopefully sufficiently restrictive stance of policy that will bring inflation back to 2%.”

“We’ve taken extraordinarily strong policy actions over the past year, and as we’ve shown, we’re going to continue to take the actions that are needed to get inflation back to 2%. Price stability is absolutely essential for a strong economy in the long run. We need to get that done, and we will.”

Recession

“We’re clearly not in a recession right now, based on the data. It is an economy that is growing, but only modestly, and I think it’s an economy that’s really seeing the imbalance issues between supply and demand diminishing, and inflation coming down.”

“Obviously, where we’re seeing the signs of the economy slowing is in the housing sector, and now in manufacturing. Consumer spending has been jumping around a bit month and month, quarter to quarter. It’s actually been more up until this latest data, more resilient perhaps than I was expecting. So, we just have to go through all that data, and really see the underlying strength in the economy. That data doesn’t change my basic view that we’re going to have an economy growing modestly over the next year.”

Inflation

“One is inflation expectations have been coming down. They’ve been really well anchored for longer-run expectations, but we’ve also seen in our New York Fed survey and in the Michigan survey, shorter-term inflation expectations coming down. So, I think that we’re not seeing that dynamic kick in of people expecting higher inflation, demanding higher… or wage increases because of that.”