Federal Reserve Bank of New York President John Williams said Wednesday that inflation is still at problematic levels and the U.S. central bank will act to lower it, in comments that noted recent stress in the banking sector will likely weigh on economic activity.
“Inflation is still too high, and we will use our monetary policy tools to restore price stability,” Williams said in a speech given before a gathering held by the Money Marketeers of New York University.
The Fed has raised its short-term rate target very aggressively over the last year and at its late March meeting, it increased its rate target by 25 basis points to between 4.75% and 5%. It is widely expected to increase that rate by another quarter percentage point at its early May meeting and hold rates there for the remainder of the year.
“It is still too early to gauge the magnitude and duration of these effects, and I will be closely monitoring the evolution of credit conditions and their potential effects on the economy,” Williams said. Williams then told reporters the strong levels of borrowing show that the stigma that had long caused banks to stay away from borrowing via the Fed's discount window is fading, and he added the Fed does not want to reintroduce it. He also said that it would be likely this borrowing declines as banking sector conditions further stabilize.The central banker noted in his speech that while inflation is high it has been cooling.
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