Author: Jin Shi Data, Financial Media

John Williams, the President of the New York Fed, stated on Thursday local time that inflation in the United States remains too high, and the Federal Reserve needs to take further action to ensure prices consistently return to the policy target of 2%.

During an event in New York that evening, Williams said: "The level of inflation is far too high, and even from the latest published data, it remains at elevated levels. We need to take corresponding measures in the near future to ensure that inflation can timely and sustainably return to the target level of 2%."

However, he emphasized that the Federal Reserve must also avoid causing unnecessary harm to the goal of full employment. He believes that overall, the U.S. economy does not seem to be out of balance at the moment.

The Federal Reserve implemented its first interest rate hike in three years in September, and subsequently decided to maintain interest rates unchanged in the October meeting to await more economic data. Since then, officials have gradually formed a broad consensus that to curb persistently high inflation, interest rates still need to be increased further, but there remains internal disagreement on the specific magnitude and pace of the rate hikes.

Inflation Data Reinforces Rate Hike Expectations, Officials Have Divergent Views on Pace

Williams stated that the Federal Reserve decided in September to assess subsequent economic data to better understand the economic trajectory before deciding on monetary policy in the next meeting. He said: "We will continue to proceed according to this process."

However, he believes that recent published data has released a rather clear signal: the U.S. economy remains strong, the labor market continues to strengthen, and inflation remains stubborn. Williams remarked: "To bring monetary policy back to the appropriate position, we still have a lot of work to do."

The U.S. October inflation report released on Tuesday showed that the core Consumer Price Index (CPI), excluding food and energy prices, rose by 0.3% month-on-month, exceeding market expectations for the third consecutive month.

This report further reinforced the judgment that the Federal Reserve needs to continue tightening policy. Austan Goolsbee, President of the Chicago Fed, described it as "disturbingly at a critical level."

However, there are still differing views among Federal Reserve officials regarding the extent of the rate hikes. Anna Paulson, President of the Philadelphia Fed, stated this week that "further gradual tightening of monetary policy seems appropriate at this time."

In contrast, Federal Reserve Governor Christopher Waller left space for larger rate hikes. He previously stated that if the October inflation data exceeded expectations, the Federal Reserve might consider a one-time rate hike of 50 basis points as early as December, rather than the usual 25 basis points. The subsequently released inflation data indeed exceeded expectations.

Rate Futures Bet on Three Consecutive Hikes

Currently, market expectations for the Federal Reserve's subsequent policy path have clearly turned hawkish. Rate futures indicate that investors expect the Federal Reserve to raise rates by 25 basis points at each of the next three meetings (December, January of next year, and March).

Williams is a centrist on the Federal Reserve's monetary policy committee, and his statements regarding economic conditions and rate policy have always been closely watched by the market and can sometimes directly influence financial market trends.

Especially after Federal Reserve Chairman Kevin Warsh reduced public discussions about economic conditions and future interest rate trends, Williams' policy statements have attracted more attention from investors.

As inflation has consistently exceeded expectations, the policy pressures facing the Federal Reserve are increasing. Moving forward, the market will focus on whether other officials will further support consecutive rate hikes and whether economic data released before the December meeting can reinforce this policy path.

Multiple Federal Reserve Officials Sequentially Release Hawkish Signals

Mary Daly, President of the San Francisco Fed, stated on Thursday that to lower inflation, the Federal Reserve may need to raise rates further.

Daly said at an event held at the Stanford Institute for Economic Policy Research in California: "My inclination is that further tightening of monetary policy will be necessary, as we see that inflation continues to face pressure, and this pressure is not just coming from industries most directly impacted by tariffs or oil prices." She noted that she has heard more and more businesses stating that due to rising input costs, they will have to pass on higher costs to consumers.

Daly also discussed the impact of artificial intelligence and its future development prospects. She stated, without a doubt, that AI infrastructure development is driving up price pressures, but the current impact on overall inflation is still limited, as the related cost increases are not large enough and have not spread to other areas.

Daly stated: "This only indicates that other factors, not AI-related goods, are currently driving overall inflation upwards." She reiterated her optimism regarding the long-term impact of AI on faster productivity growth, but said it is still too early to determine when this impact will truly manifest.

Daly does not have a vote on monetary policy this year, but she reiterated her support for the Federal Reserve's previous interest rate decisions.

Also on Thursday, Austan Goolsbee, President of the Chicago Fed, Beth Hammack, President of the Cleveland Fed, and Jeff Schmid, President of the Kansas City Fed, all expressed their concerns about persistently high inflation.

Hammack stated at an event in Columbus, Ohio: "My expectation is that we need to shift monetary policy to a restrictive stance to help bring down inflation." She indicated that if the Federal Reserve falls behind the curve in combating inflation, officials could consider adopting more aggressive actions, but she currently does not believe this is necessary.

Goolsbee stated in an interview with Yahoo Finance that the construction of artificial intelligence infrastructure may be exacerbating inflationary pressures in the economy, putting the Federal Reserve in a phase where inflation is more difficult to suppress. Schmid stated that the Federal Reserve has not yet defeated the inflation enemy.

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