Inflation target ‘critical’ for achieving stable prices By Reuters

PALO ALTO, California (Reuters) – New York Federal Reserve Bank President John Williams on Friday said he believes the U.S. central bank’s 2% target for inflation is “critical” to its efforts to achieve price stability.

“Theory and experience have also shown the importance of transparency and clear communication, including setting an explicit, numerical longer-run inflation target, and of taking appropriate actions to support the achievement of that goal,” Williams said in remarks prepared for delivery to a monetary policy conference at Stanford University’s Hoover Institution. “These are critical in anchoring inflation expectations—which, in turn, help keep inflation at its target level.”

The Fed has been battling too-high inflation for more than two years, raising interest rates from near zero in March 2022 by more than five full percentage points, an aggressive pace not seen in 40 years.

While price pressures have eased since their peak in mid-2022, inflation is still running above the Fed’s 2% goal, a centerpiece of the Fed’s approach to policy since 2012. Later this year Fed policymakers plan a broad review of the central bank’s policy framework, and a number of critics are urging big changes.

“The future is uncertain,” Williams said in his prepared remarks. “But as we continue to move closer to our 2% longer-run inflation goal, I’m confident that we have the foundation of theory and experience to guide us in restoring price stability and set the stage for sustained economic prosperity. We are committed to getting the job done.”

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Fed policymakers earlier this week agreed to leave short-term borrowing costs in the 5.25%-5.5% range where they have been since July 2023.

Williams did not offer any updated views on whether or when the Fed should begin cutting interest rates. Fed policymakers have signaled they won’t cut rates until they are more confident inflation is headed sustainably to the Fed’s goal.

SOURCE: – Economy News   (go to source)
AUTHOR: Reuters
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