“As time goes on, action is needed to ensure that inflation timely and sustainably returns to the 2% target.” Williams' statement this time is clearer than before. Previously, he indicated support for the Federal Reserve to gather information before determining its policy stance, and this speech further adds a clear signal that “further action is needed.”

Written by: Dong Jing, Wall Street News

The “third in command” of the Federal Reserve, New York Fed President John Williams, issued a hawkish signal, clearly stating that inflation remains too high, there is still work to be done on monetary policy adjustments, and emphasized the need for further action to ensure inflation timely and sustainably returns to the 2% target.

According to Bloomberg's report on November 13, Williams stated during an event in New York on Thursday evening (November 12) local time, “The level of inflation is too high, and the latest data still shows that inflation remains elevated.” He further pointed out, “As time goes by, we need to take action to ensure that inflation timely and sustainably returns to our 2% target.” He also emphasized, “We still have a lot of work to do in adjusting monetary policy to the right position.”

Williams' statement this time is clearer than before. Previously, he supported the Federal Reserve in gathering information before determining its policy stance, and this speech further supplements the clear signal that “further action is needed.” Given that Federal Reserve Chair Kevin Warsh has recently spoken less publicly about the policy outlook, Williams' statement as a permanent voter on the FOMC is closely watched by the market.

Data signals are clear, and inflation stubbornness is highlighted

Williams stated that the Federal Reserve reached a consensus in September to evaluate the upcoming published data for a clearer understanding of the “current situation” before making policy decisions at the next meeting.

“I think the data is sending us a very clear signal — the economy is strong, the labor market continues to strengthen, and inflation exhibits stubbornness.”

An article by Wall Street News previously mentioned that the inflation data released on Tuesday showed that the core CPI in the U.S. excluding food and energy costs rose 0.3% month-on-month in October, exceeding expectations for the third consecutive month.

The economy is strong but not unbalanced, and labor market constraints cannot be ignored

Williams has a generally optimistic view of the current economic situation. “The U.S. economy is not only continuing to grow but actually seems to be strengthening,” he said, “We see this in the labor market as well. However, we do not see signs of the economy overheating, nor do we see signs of imbalance in some way.”

At the same time, Williams also delineated boundaries for policy tightening. He emphasized that the Federal Reserve must “ensure that it does not cause unnecessary harm to the maximum employment mission” while pursuing actions to combat inflation while also considering the stability of the labor market.

Multiple officials release concentrated hawkish signals

Williams' statement is part of a recent concentrated release of hawkish signals by Federal Reserve officials.

Since this week, several Federal Reserve officials, including Dallas Fed President Logan, Fed Governor Waller, Kansas City Fed President Schmid, and Fed Governor Bowman, have all released hawkish signals in their speeches, indicating that inflation pressures in the U.S. remain stubborn, and monetary policy still needs to tighten further.

Among them, Fed Governor Waller expressed an even more aggressive view on the pace of rate hikes — if inflation remains high, a 50 basis point rate hike should be made in December, needing to recapture the previous “three preventive rate cuts.”

Currently, interest rate futures show that investors expect the Federal Reserve to raise rates at the next three meetings consecutively.