Economy
Fed’s Williams says central bank may be done with rate rises
© Reuters. A money changer counts U.S. dollar banknotes at a currency exchange office in Diyarbakir, Turkey May 23, 2018. REUTERS/Sertac Kayar
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By Michael S. Derby
NEW YORK (Reuters) – Federal Reserve Bank of New York President John Williams said Friday the central bank may be done with rate rises as inflation pressures, while still elevated, are moving back toward the official 2% target.
“My current assessment is that we are at, or near, the peak level of the target range for the federal funds rate,” Williams said in a speech text. “I expect we will need to maintain a restrictive stance of monetary policy for some time to fully restore balance to demand and supply and bring inflation back to desired levels.”
But Williams noted that because uncertainty about the future remains high, “our decisions, as always, will be guided by the data, with our eyes squarely on our goals.”
Williams’ comments were his first since last week’s Federal Open Market Committee meeting, when officials maintained their overnight target rate range at between 5.25% and 5.5%, while penciling in one more hike before the year ends.
At that meeting, officials also marked up growth and employment forecasts, and suggested they’d keep rates higher for longer compared to their last round of formal projections in June.
Fed officials have been able to decelerate what had been a very aggressive campaign of rate rises due to cooling inflation pressures over recent month.
On Friday, the government reported the core personal consumption expenditures price index, which is stripped of food and energy costs, rose by 3.9% in August versus the same month a year ago, from July’s 4.3% increase. The year-over-year increase in the overall PCE price index stood at 3.5%, from July’s 3.4% increase.
“Although inflation has come down from the peak reached last year, it is still too high,” Williams said, adding “price stability is the bedrock upon which our economic prosperity and stability stands.”
Williams said in his remarks he expects to be “closing in” on 2% inflation in 2025. This year he said it will stand at 3.25%, falling to 2.5% next year.
On the hiring front, the central banker said the labor sector is coming into better balance. Compared with the current 3.8% unemployment rate, he believes the jobless rate will rise to a little over 4% next year. On the growth front he said he sees the gross domestic product at 1.25% next year.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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