Federal Reserve official John Williams said bringing inflation down to 2 percent remains the central bank's top priority, adding that the current level of interest rates is appropriate and that recent moves in bond yields have been driven mainly by solid economic fundamentals rather than by shifts in the inflation outlook. Speaking on September 2, Williams said the recent rise in yields reflects strong economic performance, an optimistic economic outlook and robust investment demand, with some connection to the Middle East conflict. He flagged tariffs and the Middle East war as the main factors keeping inflation above target, but said no second-round inflation effect from tariffs has materialized and inflation expectations remain contained. Recent inflation data has been encouraging and points to a downward trend, though services inflation is still notably elevated, he said. Williams described the labor market as stable and remaining solid, saying policy must bring inflation back to 2 percent in the foreseeable future. He supports the July FOMC decision, believes the current rate level is appropriate, and said monetary policy implementation is progressing smoothly. Before making the next policy decision, he wants to observe and analyze economic data further and will keep gathering information for the next FOMC meeting.
Federal Reserve official John Williams said on September 2 that returning inflation to 2 percent remains the central bank's top priority, and that the current level of interest rates is appropriate.
Williams said bond yields are an important piece of information for the Fed's assessment of the economy. The recent rise in yields has been driven mainly by strong economic performance, an optimistic outlook and robust investment demand, with some link to the Middle East conflict as well. For now, yields do not appear to have been significantly affected by the inflation outlook, he said.
Tariffs and Middle East war keep inflation above target
Williams stressed that the Fed will look at all economic data, and that its ultimate responsibility remains price stability. Getting inflation down to 2 percent is the top priority. Tariffs and the Middle East war are the main factors keeping inflation above target, he said, though no second-round inflation effect from tariffs has been seen so far. Inflation expectations remain under control, recent inflation data has been encouraging and the overall trend is downward. Services inflation, however, remains clearly elevated.
Solid labor market, support for July FOMC decision
Williams said the labor market is stable and remains solid, and that inflation must be pushed back to 2 percent in the foreseeable future. Before making the next policy decision, he wants to further observe and analyze economic data, and will continue collecting information for the next FOMC meeting.
He said he supports the July FOMC decision, believes the current interest rate level is appropriate, and that monetary policy implementation is progressing smoothly. (Jin10)
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