Inflation Still Too High, Says Fed's Williams

Inflation must return to 2% over time, New York Federal Reserve (Fed) President John Williams said on Friday. With inflation still too high, he said the central bank would need to take action to achieve that goal. 

Selected remarks

Growth is robust and the economy remains resilient. 

The US economy is gaining strength without overheating. 

Inflation is still too high. 

Price pressures remain elevated and stubbornly persistent. 

The central bank has continued to collect data at a steady pace. 

Returning inflation to 2% over time will require action from the central bank. 

Further work is needed for the central bank to achieve the appropriate monetary policy stance. 

Inflation, rather than price levels, is the target of monetary policy. 

Seeking to lower the overall price level could lead to weak economic conditions. Market response

Williams highlights US resilience as inflation stays too high

A 7/10 FXS Speechtracker score placed Fed’s Williams above the 6.1/10 historical average. His moderately hawkish remarks marked a firmer policy tone than the established baseline. Descriptions of the US economy as “resilient” and “robust”, coupled with inflation that is “stubbornly persistent” and “too elevated”, suggest the Federal Reserve sees sufficient ongoing economic strength to retain a tightening bias. Williams also distinguished between targeting inflation and targeting the overall price level. His warning that efforts to lower prices could harm economic conditions reinforces the aim of returning inflation to 2% over time, rather than generating outright deflation.

A decline of 0.08 points brought the FXS Fed Sentiment Index to 147.47. This signals a modest easing in perceived hawkishness, despite the still-robust tone registered by the FXS Speechtracker. The reading remains well above the neutral 100 level, placing the Federal Reserve firmly in hawkish territory. Nevertheless, the small decline suggests a more measured approach to future policy tightening that would support the Dollar.

Dollar performance

A 0.05% gain puts the US Dollar Index (DXY) at around 103.23 at the time of publication.