The president of the federal reserve of New York, John Williams, said on Friday (11) that the current ones Commercial policies of the government of US President Donald Trump will accelerate inflation this year.
Williams also added that it is essential that the Central Bank prevents the long -term expectations about price pressures be disagreeed.
“It’s hard to know accurately how the economy will evolve,” Williams said in comments prepared for the Puerto Rico Chamber of Commerce.
“Considering recently and other policy changes, there is an exceptionally wide range of results that may occur.”
In the light of Trump’s uncertainty to impose heavy import rates on a wide range of business partners, the economy’s strong early year will probably give way to something less favorable, Williams said.
The during this period to know how to react with monetary policy, he said.
Williams said he expects rates to raise inflation to between 3.5% and 4% this year, which would represent a sharp increase in price pressures compared to the current level of the PCE index, which was 2.5% in February at the annual base.
PCE is the main inflation indicator used by the Fed.
“Given the combination of deceleration in the growth of the workforce due to the reduction of immigration and the combined effects of uncertainty and tariffs, now I hope the actual GDP growth decreases considerably from last year’s pace, probably to a little below 1%.”
While the
Williams noted that he is still committed to taking inflation back to the goal of 2% of the Fed.
He said that while short -term inflation expectations have increased, long -term those remain under control, and it is essential that the Fed continues.
Your Perspective on growth slowingIncreased unemployment and much higher inflation is difficult for the Fed, as it does not imply a clear response to monetary policy.
However, Williams warned, in comments after his formal lines, that as difficult as the current perspective is, it is not a repetition of past problems.
“It’s not about ”,” said Williams.
“I’m old enough to know what ‘stagflation’ was in the 1970s and early 1980s,” he said.
Adding that “it was a period of two -digit unemployment, two -digit inflation, a period of high inflation and economic weakness” that the Fed will take steps to ensure that it does not repeat itself.
Financial markets generally expect a series of Fed interest rate cuts to protect the economy from falling risks, while the US Central Bank authorities in recent comments highlighted the importance of not letting inflation come out of control.
Most suggested that they see no imminent reason to change the Referential interest ratewhich is currently defined in the range of 4.25% to 4.50%.
“The best possible way” and its “modestly restrictive” level is the most appropriate, considering the current level of inflation, Williams said.
The current position of the Fed in relation to rates “gives us the opportunity to evaluate the data and developments that are coming.
And ultimately, it positions us well to adjust to the changes in the circumstances that affect the fulfillment of our double -mandated goals, ”he said.
