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November 30, 2023

Key Takeaways from President Williams’s Speech on Restoring Price Stability

New York Fed President John C. Williams spoke about monetary policy and his economic outlook at an event hosted by the Bretton Woods Committee and the New York Fed on November 30, 2023.

He said:

“The FOMC has reached a restrictive stance of monetary policy. This is working to bring demand into balance with supply and inflation back to our 2 percent longer-run goal.”

“In balancing [the] risks, and based on what I know now, my assessment is that we are at, or near, the peak level of the target range of the federal funds rate.”

“All of that said, the future remains highly uncertain, and our decisions will continue to be data dependent.”

In his remarks, President Williams said the Federal Reserve is working to achieve its dual mandate of maximum employment and price stability. “We are doing well on the employment side of the mandate,” he said. “But the imbalances between supply and demand that have persisted since the onset of the pandemic have contributed to unacceptably high inflation.”

Inflation—as measured by the personal consumption expenditures (PCE) price index—has fallen to 3 percent, down from a 40-year high of just over 7 percent in June of last year. “This is a significant and welcome decline,” President Williams said. “Nonetheless, inflation is still too high.”

President Williams said some areas of inflation, including globally traded commodities and core goods excluding food and energy, have seen significant improvements. However, core services inflation is declining more slowly.

“I expect it will be appropriate to maintain a restrictive stance for quite some time to fully restore balance and to bring inflation back to our 2 percent longer-run goal on a sustained basis,” he said.

He also noted that the ongoing reduction of the Federal Reserve’s securities holdings is working as designed. “We have so far reduced our securities holdings by over $1 trillion, with no signs of adverse effects on market functioning,” he said.

Along with a restrictive monetary stance, President Williams said financial conditions have tightened. As a result, he expects:

  • GDP growth to slow next year to about 1-1/4 percent.
  • The unemployment rate to rise to around 4-1/4 percent.
  • PCE inflation to be around 3 percent for 2023 as a whole, then decline to 2-1/4 percent in 2024 and close in on 2 percent in 2025.

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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