By Laurie Laird
LONDON (MaceNews) – A key U.S. rate setter Friday poured cold water on recent market chatter of an uptick in inflation, predicting a slowdown of the economic recovery which is likely to keep a lid on price pressures.
Growth “in the fourth quarter and maybe into next year will slow somewhat,” said John Williams, president of the Federal Reserve Bank of New York at the virtual FT Global Boardroom conference, even as recent “economic news has been much better than expected.”
A number of investment banks have revived talk of inflation risks and a resulting steepening of the yield curve since news of a positive trials of a Covid vaccine hit the headlines earlier this week. Williams, who is notably dovish toward inflation, acknowledged rising yields at the “top” of the curve as “tail risk has gone away since the vaccine news.” But he stressed that he sees only “downward momentum on inflation.”
With Williams suggesting that a period of above-target inflation may be some way off, he had little to say about how long the Fed might allow inflation to run above 2% under the new regime of symmetrical inflation targeting. “It’s not a mathematical formula .. this isn’t a complicated model.”
In the wake of the bitterly-fought presidential election, Williams was careful not to venture into the political sphere, even over the question of further fiscal stimulus. “I’m not going to give advice to Congress as to what people should do,” he said, but added that rapid Congressional action over the spring “made a huge difference.”
Williams also refused to be drawn on an expected Senate vote on the confirmation of Judy Shelton, President Donald Trump’s nomination to the Federal Reserve Board. Appointment decisions “are made by others,” he said. “We’ll have to let events unfold.”
Shelton is regarded as a close ally of Donald Trump, and her nomination raised questions over her political independence under a president who has, at times, publicly berated the central bank and its leader, Jerome Powell. Senate leaders have implemented procedural steps that could allow for a confirmation vote some time next week.
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Contact this reporter: laurie@macenews.com.
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