August 19, 2022

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The Fed’s Williams sees US growth below 1% in 2022

John Williams, chairman of the New York Federal Reserve, speaks at the Economic Club of New York in Manhattan

By Howard Schneider

MAYAGUEZ, Puerto Rico (Reuters) – U.S. economic growth is expected to remain below 1% this year and remain sluggish through 2023 as the country’s central bank works “resolutely” to control inflation, the central bank said. Book from New York, John Williams, It’s Friday.

In comments prepared for a speech on the campus of the University of Puerto Rico, Williams did not say whether he favors a 0.75 percentage point increase in interest rates at the Fed’s next policy meeting this month. Many of your colleagues have already approved this scale adjustment.

However, he reiterated the strong language that U.S. central bank officials have used to characterize their commitment to reducing inflation toward the central bank’s 2% target from the current highest level in decades.

“Inflation is sky high and the number one risk to the overall health and stability of a well-functioning economy,” Williams said. “I want to be clear: this is not an easy task. We must be firm, we cannot deceive.

The central bank’s 0.75 percentage point rate hike in June, the most radical since 1994, was “an important step” in tightening monetary policy.

Williams said further increases would depend on “how the economy responds to tightening fiscal conditions and how inflation, inflation expectations and the economic outlook evolve.”

Meanwhile, the economy is sluggish. Williams said his growth outlook for this year is now less than 1%, at the lower end of recent central bank officials’ forecasts. An expected acceleration of 1.5% next year would still leave the US growth rate below trend.

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That would help ease pressure on prices, but it would also push up the unemployment rate, which could hit 4% at some point in 2023, Williams said.

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