Fed's Williams: Fed needs more rate rises to cool inflation

Reuters reported that Federal Reserve Bank of New York President John Williams said on Thursday the US central bank has more rate hikes ahead and sees signs inflationary pressures might be starting to cool off from torrid levels.

“With inflation still high and indications of continued supply-demand imbalances, it is clear that monetary policy still has more work to do to bring inflation down to our 2% goal on a sustained basis,” Williams said in the text of a speech to be delivered before the Fixed Income Analysts Society in New York.

“Bringing inflation down is likely to require a period of below-trend growth and some softening of labour market conditions,” Williams warned.

Key comments and notes

US inflation is still too high, the Fed has more work to do on rate rises.

Lowering inflation will need a period of slower growth, a softer job market.

Fed must stay the course until inflation is brought back to 2%.

Balance sheet reduction is going well.

Williams sees signs inflation pressures starting to moderate. 

Williams expects inflation to cool to 3% this year.

Williams expects US growth of 1% this year.

He expects US Unemployment to rise to 4.5% this year.

He said it is very important for the public to understand Fed's desire to lower inflation.

He explained market pricing is roughly consistent with Fed's rate outlook.

Made sense for the Fed to slow rate rises in December.

Won't prejudge the size of a rate rise at the upcoming FOMC meetings.

Fed still has a ways to go on rate rises.

The hike cycle stopping point is dependent on data. 

The jobs market is more resilient than expected. 

US Dollar update

The price of the DXY index moved into the W-formation's neckline and has since stalled in the support. The new M-formation is the next compelling phenomenon on the charts that may serve to pull the price higher. If the neckline breaks, then 102.20 will be important.