New York Federal Reserve President John Williams said on Friday that US inflation is too high and must return to 2%. He noted that economic growth remains resilient despite global shocks. "It's absolutely essential that we bring inflation back to our 2% target in a timely manner," Williams said.
FRANKFURT, Nov 6 (Reuters) - US economic growth has remained resilient and the labour market is remarkably stable despite successive shocks, but inflation is too high and must be brought back to 2%, New York Federal Reserve President John Williams said on Friday.
Inflation has soared across the world, mostly as the US war on Iran has pushed energy prices higher but also because soaring investment in AI has pushed up costs for some IT-related products and services.
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"Inflation is absolutely too high. It's been too high for too long," Williams told a European Central Bank conference in Frankfurt. "It's absolutely essential that we bring inflation back to our 2% target in a timely manner and a sustained basis."
But Williams also argued that the Fed's key focus should be on where inflation is heading and making sure that current shocks do not translate into broader or more persistent inflation.
"Fortunately, we're not seeing that happen so far in terms of inflation expectations, which remain well anchored," Williams said. "We're seeing wage growth (that is), I think, consistent with our 2% goal."
While Williams did not discuss what the Fed's next policy move should be, he said the bank's last policy statement had correctly concluded that it was appropriate for the Fed to collect more information to determine what the appropriate stance of policy is.
Financial markets see a more than 50% chance of a rate hike by the Fed in December while a move by March is fully priced in.
Reporting by Francesco Canepa; writing by Balazs Koranyi; editing by Gareth Jones