Federal Reserve Bank of New York President John Williams said Monday that while the U.S. economy is likely to have a very strong year ahead, there isn’t yet an imminent need for the central bank to pull back on its aggressive levels of monetary policy support.
“The economy is now positioned to grow quickly” and “with accommodative financial conditions, strong fiscal support, and widespread vaccinations, I expect that the rate of economic growth this year will be the fastest that we’ve experienced since the early 1980s,” Mr. Williams said in a virtual appearance where he also took questions from the audience and then reporters.
But that level of growth doesn’t mean the Fed needs to shift gears. “We are still far from our goals of maximum employment and price stability,” Mr. Williams said, adding “let me emphasize that the data and conditions we are seeing now are not nearly enough for the FOMC to shift its monetary policy stance.”
Mr. Williams’ comments were his first public remarks since last week’s gathering of the rate-setting Federal Open Market Committee. Then, officials left in place the near zero interest rate stance they implemented just over a year ago and pressed forward with $120 billion a month in bond buying. In a statement announcing the status quo outcome, the Fed offered a view that showed increased confidence in the outlook that also flagged the likelihood of a temporary rise in inflation.
In March, Fed officials offered forecasts that penciled in no change in rates through at least 2023, and officials have given little guidance about the timing of when they will slow the pace of asset buying. At the press conference following last week’s FOMC meeting, Fed Chairman Jerome Powell said “it’s very likely, it seems to me, that for us to achieve the economic outcomes we would need to taper or to raise interest rates, we would also have to have made very substantial progress in getting the virus under control—not necessarily fully under control,” while adding “we don’t have to get all the way to our [job and inflation] goals to taper asset purchases.”
