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
No indications af any near term rate cuts from the Federal Reserve in Williams’ comments.
This article was written by Eamonn Sheridan at www.forexlive.com.