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A leading U.S. central banker vowed Wednesday that the Federal Reserve will return inflation to its 2% target.
“We are going to tame inflation. We’re absolutely committed to getting inflation back to 2% over the next few years,” Williams said at an event in New York sponsored by several top economic institutions and Columbia University.
The Fed needs to take actions with its interest-rate policy to bring demand and supply back into balance, Williams said.
A critical part of the Fed’s messaging is the 2% inflation target, he said.
During the last bout of high inflation from the late 1960s until the early 1980s, the Fed didn’t have an inflation target.
Having a very clear numerical target has helped the Fed keep public expectations about future inflation well-anchored, he said.
“But at the end of the day, our job is clear. Our job is to make sure that we restore price stability,” he said.
Also read: Who will replace Lael Brainard at the Fed? Here are some names to know.
There is no confusion about “who owns the goal and the absolute importance” of the need to get inflation down, Williams said, calling that fact the “secret sauce” behind the effort to tame inflation.
The New York Fed president has a unique role for a regional Fed bank president: He always has a vote on the Fed’s interest-rate committee, while other regional Fed presidents rotate their votes every two or three years.
In his remarks, Williams said that the battle against inflation is still a work in progress.
Although prices of goods have come down over the past several months, there are some signs further progress “might not go as quickly as hoped,” he said.
Two factors keeping goods prices stubbornly high are supply-chain issues and strong demand from China, he said. In addition, the U.S. economy looks resilient and Europe’s economy is doing better.
This stronger demand probably means that these prices “aren’t going to come down as fast as some have predicted,” he said.
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