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February 14, 2023

Key Takeaways from President Williams’s Speech on the Economic Outlook and Monetary Policy

Judy DeHaven

On Tuesday, February 14, 2023, New York Fed President John Williams spoke at an event hosted by the New York Bankers Association. He discussed inflation, imbalances in supply and demand, and the ways in which monetary policy is working to restore balance in the economy.

He said:

“Although we have seen some moderation in recent months, the inflation rate remains far too high at 5 percent.”

“When it comes to monetary policy, we must restore balance to the economy and bring inflation down to 2 percent on a sustained basis.”

“We will we stay the course until our job is done.”

In his remarks, President Williams said the Federal Open Market Committee (FOMC) has “taken strong actions to bring inflation down.” Tighter monetary policy, both in the U.S. and abroad, has led to declines in prices for globally traded commodities. And it’s helped dampened global demand for goods—which, along with improvements in supply-chain disruptions, has likely contributed to the easing of prices for some goods, he said.

However, President Williams said “the economic resiliency of Europe and a rebound in growth in China following the end of COVID restrictions will likely increase global demand for goods. And further improvement in global supply-chain disruptions has stalled over the past few months.”

In addition, prices for non-energy services, which are influenced by the balance of overall supply and demand, will take the longest to ease, he said. While inflation, as measured by the personal consumption expenditures (PCE) price index, has moderated, it is still well above the FOMC’s longer-run goal of 2 percent, and measures of underlying inflation also remain too high, he said.

“We still have some way to go” to achieve 2 percent inflation, President Williams said. “And it will likely entail a period of subdued growth and some softening of labor market conditions.” As a result, he expects for 2023:

  • Real GDP growth to come in around 1 percent
  • The unemployment rate to edge up to between 4 and 4-1/2 percent
  • And PCE inflation to fall to 3 percent, before moving closer to 2 percent in the next few years

Read the full speech.

Judy DeHaven is an executive communications specialist at the New York Fed.

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.

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