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Monday, December 6, 2021

New York Fed Williams Says Inflation Is Rising, Getting Broader

As the President of the Federal Reserve Bank of New York John Williams said Thursday, inflation in the United States is growing wider and expectations of future price increases are rising – a trend that policymakers will be watching closely.

While some of the price increases seen today are due to the pandemic and the imbalance between supply and demand, Williams said, there has been growth in other areas such as housing.

“We are definitely seeing a rise in core inflation in the US, which we will be looking closely at,” Williams said during a virtual discussion with European Central Bank (ECB) chief economist Philip Lane.

The rise in short-term and long-term inflation expectations is a “positive” development as expectations have reversed some of their previous declines. But officials would not want long-term inflation expectations to rise significantly, Williams said.

According to him, the US economy is “roaring” after being disrupted by the pandemic, and “a unique set of circumstances” is causing changes between supply and demand.

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“I really think our structure is a good fit for this because it starts again from now on, and we want to make sure inflation expectations are firmly anchored at 2 percent over time,” Williams said.

When asked about the role of a potential central bank digital currency, Williams said the Fed is in “learning mode” and is trying to better understand the technologies that can be used and the policy issues that need to be addressed with regard to the CBDC.

“I think it’s too early to think about all of these issues,” Williams said. “I also think they are very closely related to what is happening in the world of cryptocurrencies, stablecoins and the like.”

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