On Monday, June 21, New York Fed President John Williams spoke at a meeting hosted by the Midsize Bank Coalition of America about the transition away from the London Interbank Offered Rate (LIBOR) and the economic outlook and recovery from the pandemic.
He said:
“We find ourselves at an extraordinary juncture in the recovery. Thanks to widespread vaccinations and robust support from fiscal policy, the economy is reopening more quickly and more strongly than expected.”
“With the strong, sustained demand for workers and progress on hiring, I am confident that we will see continued strong job gains going forward.”
“My view is that the spike in inflation mostly reflects the temporary effects of the surprisingly rapid opening of the economy.”
In his speech, President Williams began by commenting on the transition off the London Interbank Offered Rate (LIBOR). “[W]e’re only about six months away from moving off of LIBOR,” he said. “During this critical time, it’s important to focus on building a strong and robust foundation for the future so that we never have to go through a transition like this one again.”
On the economic outlook, he noted that the rapid rebound is “excellent news,” but it also means that “we are seeing strains as businesses try to keep up with the rapid acceleration in demand for their products.” He pointed out that as a result, there are a “record number of job openings, supply bottlenecks in sectors such as autos, and sharp increases in prices for some high-in-demand goods and services.”
With regard to big movements in the labor markets, he explained that they “reflect the extraordinary nature of the pandemic, as employers and workers adapt to rapidly changing circumstances.” Turning to inflation, he said that “[o]nce these prices have fully adjusted to the reopened economy, they shouldn’t continue to increase at recent elevated rates, and their effect on overall inflation should subside.”
President Williams also explained the policy response of the Federal Open Market Committee (FOMC), saying “[i]t’s clear that the economy is improving at a rapid rate, and the medium-term outlook is very good,” but that “the data and conditions have not progressed enough for the FOMC to shift its monetary policy stance of strong support for the economic recovery.” Regarding the future, he said “the FOMC has defined conditions and measures that will inform its decision-making.”
This article was originally published by the New York Fed on Medium.
The views expressed in this article are those of the contributing authors and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.
