(Bloomberg) -- Federal Reserve Bank of New York President John Williams said interest rates need to rise to around 4.5% over time but the pace and ultimate peak of the tightening campaign will hinge on how the economy performs.
“The timing of that and how high do we have to raise interest rates is going to depend on the data,” Williams said Friday during a moderated discussion organized by SUNY Buffalo in western New York. “Right now the focus is getting inflation back down to 2%.”
Williams is vice chair of the rate-setting Federal Open Market Committee and a key member of Chair Jerome Powell’s leadership team. His remarks follow a string of hawkish comments from other policymakers that has hardened bets that they will forge ahead with its aggressive tightening campaign to curb the hottest inflation in nearly 40 years.
Fed officials are raising interest rates at the fastest clip since the 1980s as they aim to squash the hottest inflation in a generation. Policymakers are anticipated to raise their benchmark rate by 75 basis points in early November for a fourth straight meeting following data Friday showing unemployment unexpectedly returned to a historic low of 3.5%.
That would bring the Fed’s main rate to a range of 3.75% to 4%. Median projections from Fed officials show they expect rates to rise to 4.4% by the end of this year and 4.6% in 2023. The US central bank is hoping higher borrowing costs will cool spending and reduce demand for workers, in turn slowing the growth of prices and wages.
Officials say they will incorporate a range of economic data at their next meeting on Nov. 1-2, including an update on consumer prices coming next week.
The Fed’s swift action, which has lifted rates by three percentage points since March, has roiled global financial markets and sent the dollar surging in value against other currencies.
Williams acknowledged that the Fed’s actions had international consequences and said he was in contact with his counterparts at foreign central banks, who also face high inflation. But he stressed that the Fed’s focus was its domestic goal to restore price stability.
“We’re all working on our own to make the decisions to bring the economy back into balance,” he said.
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