New York Federal Reserve President John Williams said on Thursday that the US central bank will probably need to raise interest rates further, as inflation remains stubbornly high even while the wider economy stays healthy.
“The economy is strong, the labour market continues to strengthen, and inflation is persistent,” Williams said at a UC Berkeley alumni event in New York. “We’ll need to take actions over time that will ensure that we get inflation back to our 2% goal in a timely manner and on a sustained basis,” he added. “We still have work to do … to get monetary policy to the right place.”
Financial markets broadly expect the Federal Reserve to lift its federal funds target range, currently 3.75% to 4%, by a quarter of a percentage point at its next meeting in early December, and then to raise rates again in January. Williams did not say when he expects the next increase, or how far the Fed will go.
There is an active debate inside the central bank about how aggressively to move, after stronger-than-expected inflation data this week. Core inflation rose 0.3% in October, a pace that Fed Governor Christopher Waller had earlier said would put a half-point rise on the table for December. Cleveland Fed President Beth Hammack, by contrast, has argued for a more modest and steady pace of increases, to give the economy time to adjust to higher short-term borrowing costs.
Williams was also asked about the elevated cost of living left by the surge in inflation over the past five years. He said there is little the central bank can do about it. Interest rates affect the rate of change in prices, rather than the absolute level of those prices, so the inflation of recent years has left many households facing a much higher overall price level.
Trying to reverse that rise would do more harm than good, he argued. History shows that attempting to “put the genie back in the bottle, that creates huge distortions and damage to the economy,” Williams said. Over recent decades, central banks have chosen to keep inflation low rather than try to undo the effects of a war or a pandemic. “There are consequences of that,” he said — and one of them is “a higher cost of living.”
Williams is a permanent voter on the Fed’s rate-setting committee, so his remarks carry particular weight with investors watching for the central bank’s next move.
Sources: Reuters — “Fed’s Williams says central bank has ‘work to do’ to get inflation back on target” (https://www.reuters.com/business/feds-williams-says-central-bank-has-work-do-get-inflation-back-target-2026-11-13/)
