Fed asks about the way forward before rates squeak growth

President John Williams, chairman of the Federal Reserve Bank of New York, announced Friday that the Fed would raise rates once again this year and three times next year.

Last week, the US central bank raised interest rates for the third time this year, as the Fed's average new forecast indicates that policymakers plan to reach a target of 3.1% by the end of 2019 a percentage point higher than the current rate. .

"I think if you look at the center of the range … these are really quite reasonable views of what the economy is going to probably go about and the policy to follow to support that expansion," Williams said in a statement. interview at Bloomberg Television.

At the same time, he said: "We still have some way to go to get an idea of ​​what people think is neutral," referring to the "neutral" theoretical level of interest rates, for which borrowing costs neither stimulate nor hinder economic growth. growth.

Fed officials currently estimate this rate at around 3 percent, but Williams said "we do not really know where the neutral is." One of the few economists to have done innovative work on the neutral rate estimate, he adds to the growing belief that the Fed relies less on the neutral estimate to assess how much raise rates.

Fed Chairman Jerome Powell said in August that he was not inclined to turn to "neutrality" to steer politics.

Williams, who among the Fed's presidents, is working closely with Powell to formulate the Fed's message, said Friday that neutrality would play a role in setting rates, but that an "element of the puzzle" that includes also a careful look at "wage growth, inflation, job growth, GDP growth: we look at many indicators in the US and abroad."

Employment growth in the United States slowed sharply in September, probably as a result of Hurricane Florence, which depressed payrolls at restaurants and retail outlets, a report released Friday said. the unemployment rate fell to 3.7%, its lowest level in 49 years.

For Williams, the report pointed to a strong labor market and economic momentum, but with very few signs of wage inflation or other sources, the gradual rise in interest rates remains the "right way" for the Fed, said Mr. Williams.