New York Fed President John Williams said on Sunday that it was important for the U.S. Federal Reserve to stick to its 2% inflation target and achieve it even as low global interest rates will likely continue, the Wall Street Journal reported.
“There’s been a process of going through the stages of grief about a low neutral rate,” Williams was quoted as saying by the Journal. “These factors are basically the hand we’ve been dealt for the next five to 10 years.”
“If inflation continues to underrun our target levels like it has, this downward trend in inflation expectations will likely continue with inflation expectations falling well below target levels,” he said.
Making sure inflation expectations do not slip too far is important, Williams told the newspaper. Inflation expectations affect actual inflation in the future.
Reporting by Ismail Shakil in Bengaluru; Editing by Peter Cooney