NY Fed Williams: There are risks to both sides of fed’s employment and price stability goals and the outlook is still uncertain

New York Fed President John Williams said on Monday that the record demand for a Federal Reserve program that lets money market funds and other firms park cash with the Federal Reserve overnight is not concerning and the tool is working as intended to help set a floor on short-term rates.

Key notes

He would not describe market reaction to last week’s fed meeting as a taper tantrum.

There are risks to both sides of Fed’s employment and price stability goals and the outlook is still uncertain.

Fed chose not to have a formula for average inflation targeting.

Core principle of Fed’s approach is that inflation expectations should be anchored at 2%.

There are upside risks to inflation, which has come in stronger than people expected.

There is a good understanding of the fed’s framework and the understanding that some inflation overshoot is part of the goal.

Labor market is matching workers at a really good clip and wages are picking up.

There is a tight labor market in the short run because we’re in this extraordinary period of churn.

Most important thing is watching the data and seeing how things play out in terms of employment gains and inflation.

Expects the economy to continue to grow nicely in the next couple of years, unemployment to continue to come down and inflation to come out close to 2%.

Overnight reverse repo facility is working exactly as designed in terms of providing a floor to interest rates.

He is not concerned about high usage of overnight reverse repo facility or if it should continue to increase

Fedhas the tools to make sure that interest rates are within the target range.

Fed’s adjustments to administered rates were about keeping the fed funds rate within the target range because the downward pressure on short-term rates is growing.

Money market funds have come under distress in the past and should have the attention of regulators.

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