John Williams, Speech: This is the Way

Fed Funds

“The FOMC also said that the “Committee will closely monitor incoming information and assess the implications for monetary policy.” I will be particularly focused on assessing the evolution of credit conditions and their effects on the outlook for growth, employment, and inflation.”

Inflation

“The March price data indicate some moderation in overall rent inflation. And rents for new leases have been showing slower rates of increases, which should bring down shelter inflation in coming months. This is important because shelter inflation had been a significant driver of higher inflation over the past year.”

“But the most persistent area of inflation is in core services excluding housing, which has been running around 4-1/2 percent since last August. This is driven by a continued imbalance in overall supply and demand, and it will take the longest to bring down.”

Because of the lag between policy actions and their effects, it will take time for the FOMC’s actions to restore balance to the economy and return inflation to our 2 percent target. I expect inflation to decline to around 3-1/4 percent this year, before returning to our longer-run goal of 2 percent over the next two years.

GDP

As tighter monetary policy continues to take effect, I expect real GDP to grow modestly this year, with growth then picking up somewhat next year.

Jobs

And I anticipate slow growth will continue to cool the labor market, with unemployment gradually rising to about 4 to 4-1/2 percent over the next year.