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John Williams, President and CEO of the Federal Reserve Bank of New York, speaks at the Central Bank Forum on the margins of the Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group in Nusa Dua, Bali, Indonesia October 10, 2018.
Fed Chairman in New York, John Williams, said on Tuesday that he was comfortable with the current level of US interest rates and that he did not see the need to raise it unless growth or inflation returns to a higher speed.
In an interview with Reuters, Williams said he felt the rates had reached his current view, namely a lower "neutral" level, with growth and unemployment stabilizing and inflation if possible, a little weaker than expected.
When asked if he would need some kind of shock to resume rate hikes, he said that it would take one or more of these factors to surprise upward.
"I do not think it would take much change, but it would be a different perspective for growth or inflation" to return to higher rates, Williams said to Williams, one of three vice presidents of the Fed and a central voice in rate policy, told Reuters.
Williams' comments, formulated just weeks after the central bank suspended its quarterly rate hikes, underscored how a more restrictive monetary bar would be imposed and suggest that such a move might not happen soon.
The Fed could also maintain bank reserve levels much closer to current levels than previously thought, Williams said.
In parallel with rising rates, policymakers are now finalizing plans on how to end the reduction in their balance sheets, including bank reserve reserves that are partly boosted by the Fed's need for liquidity to buy bonds to end the global financial crisis a decade ago.
Williams has estimated that the so-called balance-sheet transfer could end when banks' reserves reach "perhaps a trillion dollars in reserves, if not a little more than that", about $ 600 billion less than the levels. current.
The figure is "an estimate today of the amount of reserves that will be kept in the system in the future – but again, we are learning and we will have a closer contact with that, "he said.
Williams, Vice President of the Federal Open Market Committee, which sets the rates, votes every time this group meets. Politicians are "very well placed", rates are close to neutrality, the US economy is well positioned and pressures on the United States. moderate prices.
"Monetary policy is what it should be," he said. "That's what I think of what neutral interest rates are."
After its last meeting, Fed policymakers announced that their three-year policy tightening may have been over due to sudden prospects for global growth and stalemate on the government's trade and budget negotiations.
The Fed raised interest rates three times in 2017 and four times last year, going from 2.25% to 2.5% at its last meeting in 2018 in December.
More details on this political meeting in late January are expected when the Fed releases reports of its deliberations on Wednesday. Recently, Loretta Mester, President of the Federal Reserve of Cleveland, and Fed Governor Lael Brainard, both said they were in favor of the US central bank liquidating its bonds this year. The Fed's balance sheet has risen to more than $ 4 trillion from the 2007-09 recession, but policymakers have begun to reduce its holdings of bonds in the last few months of 2017. More details on this political meeting at the end of January are expected when the Fed will issue documents. of his deliberations on Wednesday.