Federal Reserve Bank of New York President John Williams speaking in Tokyo:
- Important that inflation expectations are well anchored
- You want to avoid inflation becoming highly persistent because that could become permanent
- Way to avoid that is to respond relatively strongly when inflation begins to deviate from Target
- Misperceptions about ‘r star’ can lead to long-lasting deviations
- We have to be very aware that inflation expectations could shift in any ways that could be detrimental
- You want the whole curve of inflation expectations to be well behaved
- It’s not to say inflation expectations shouldn’t move, it means they should move in a way that emerges back to target within several years
- Levels of reserves in US are clearly abundant
- When you get big shocks its really nice to have a buffer via reserves
No indications of any near term rate cuts from the Federal Reserve in Williams’ comments.
This article was written by Eamonn Sheridan at www.forexlive.com.
