Wednesday, 10 September 2025
Jakarta
--:--
Tokyo
--:--
Hongkong
--:--
New York
--:--
Fed's Williams calls for strong response if inflation deviates from target
Wednesday, 28 May 2025 10:26 WIB | ECONOMY |Amerika

New York Federal Reserve President John Williams said on Wednesday central banks must "respond relatively strongly" when inflation begins to deviate from their target.

Given high uncertainty around the economic impact of U.S. tariffs and trade policy, central banks should focus on avoiding taking steps where the "cost of getting it wrong far outweighs the benefits," rather than aiming for the perfect solution to the problem, he said.

Among the costly risks central banks must avoid are to allow inflation expectations to deviate from their targets, Williams said in a fireside chat with BOJ Deputy Governor Ryozo Himino at the central bank's conference held in Tokyo.

"You want to avoid inflation becoming highly persistent because that could become permanent," Williams said. "And the way to do that is to respond relatively strongly" when inflation begins to deviate from the central bank's target, he added.

Williams said shocks typically do not have long-lasting effects on inflation as long as inflation expectations are well anchored. But he warned there was always uncertainty on how supply-side shocks, such as those caused by the COVID-19 pandemic, could affect public perceptions on future price moves.

"Uncertainty has risen pretty significantly," he said "We have to be very aware that inflation expectations could shift in any way that could be detrimental."

Given such uncertainties, central banks must strive to not just anchor long-term inflation expectations, but ensure shorter-term expectations are "well behaved" so that public perceptions of future price moves emerge back towards central bank targets "within several years," Williams said.

U.S. President Donald Trump's sweeping tariffs and erratic trade policies have complicated central bankers' task of keeping inflationary pressure in check, without cooling too much economies already facing the damage from higher levies.

The Fed has kept its policy rate unchanged at 4.25%-4.50% since December, as officials pause for more clarity on the economic and price impact of Trump's tariffs.

Policymakers are also having to grapple with volatile market moves caused by Trump's on-and-off comments on U.S. trade negotiations with other countries.

While global financial markets experienced "huge shocks" and volatility in April after Trump's announcement of sweeping reciprocal tariffs, they did not see a "dissolution," Williams said.

"One of the things you definitely saw in April was a lot of flow between buyers and sellers," which was a sign markets were functioning, he added.

The level of reserves in the U.S. is "clearly abundant" judging by many metrics the New York Fed monitors, and serves as a buffer against unforeseen shocks, Williams said.

"When you get big shocks and you're seeing unanticipated shocks, it's really nice that there's a buffer" that absorb the market ramifications, he added.

Source: Investing .com

RELATED NEWS
US Nonfarm Payrolls benchmark revision points to 911,000 decrease in March 2025 level of employment...
Tuesday, 9 September 2025 21:13 WIB

The US Bureau of Labor Statistics reported on Tuesday that the preliminary estimate of the Current Employment Statistics (CES) national benchmark revision to total Nonfarm employment for March 2025 is...

Potential Trump tariff refund bill could top $1 trillion as Supreme Court fight looms...
Tuesday, 9 September 2025 05:05 WIB

The United States government has already collected tens of billions of dollars from President Donald Trump's "reciprocal tariffs." But that money and a lot more could end up being refunded if the Sup...

Putin says foreign troops in Ukraine would be legitimate targets...
Saturday, 6 September 2025 01:10 WIB

Ukrainian President Volodymyr Zelenskiy said on Friday thousands of foreign troops could be deployed to his country under post-war security guarantees, but Russian leader Vladimir Putin said Moscow wo...

U.S. adds 22,000 jobs in August...
Friday, 5 September 2025 20:07 WIB

The U.S. economy added fewer jobs than anticipated in August, possibly bolstering the case for the Federal Reserve to slash interest rates at its next policy meeting later this month. Data from the L...

Trump pressures European leaders over Russian oil purchases, White House official says...
Friday, 5 September 2025 03:44 WIB

U.S. President Donald Trump told European leaders on Thursday that Europe must stop buying Russian oil that he said is helping Moscow fund its war against Ukraine, a White House official said, strikin...

LATEST NEWS
Silver Firms Up on Fed Rate Cut Bets

Silver climbed above $41 per ounce on Wednesday, holding near 14-year highs as traders increased wagers on US Federal Reserve rate cuts. On Tuesday, the Bureau of Labor Statistics reported the US economy likely added 911,000 fewer jobs in the 12...

Hang Seng Index surges past 26,000 points following strong performance from Alibaba

The Hang Seng Index opened higher today, gaining 104 points to reach 26,042, before extending its rise by 227 points, or 0.87%, to settle at 26,165. This marks the index's fourth consecutive day of increases. The Hang Seng China Enterprises Index...

Oil Prices Rise, Markets Uneasy After Israeli Attack on Qatar

World oil prices rose again in Asian trading on Wednesday (September 10th) after an Israeli attack on Hamas leaders in Doha, Qatar, sparked concerns about escalating tensions in the Middle East. This attack pushed oil prices up by 2% on Tuesday...

POPULAR NEWS
Will Nonfarm Payrolls revisions hint at a 50 bps Fed cut next week
Tuesday, 9 September 2025 04:05 WIB

The United States (US) Bureau of Labor Statistics (BLS) will publish the 2025 preliminary benchmark revision to the Establishment Survey Data on...

Russian Forces Attack Power Plant In Kyiv Region, Ukraine's Energy Ministry Says
Monday, 8 September 2025 17:12 WIB

Russian forces attacked a thermal power plant in the Kyiv region as part of an overnight attack, Ukraine's Energy Ministry said on Monday,...

United States Stock Market Rise Ahead Inflation data
Tuesday, 9 September 2025 03:36 WIB

Wall Street kicked off the week with gains on Monday as investors positioned ahead of a data-heavy week that includes two key inflation reports...

European shares end higher amid all eyes on French no-confidence vote
Tuesday, 9 September 2025 01:52 WIB

European shares finished higher on Monday, while French stocks also rose as investors stayed calm in the run-up to a no-confidence vote later in the...