Fed considers further rate hikes to combat persistent inflation

Williams did not specify the timeline or magnitude of these potential increases. He emphasized that the U.S. economy was displaying notable strength, with a constantly improving labor market, but that inflation remained a persistent challenge.

“We will need to take, over time, actions that will ensure that inflation returns to our 2 percent goal in a timely and sustainable manner,” he said at an event organized by the UC Berkeley Alumni Salon in New York. “We still have work to do […] to adjust monetary policy as needed.”

Financial markets anticipate a 0.25 percentage point increase in the current target range for the federal funds rate, which is between 3.75% and 4%, at the next meeting of the Federal Open Market Committee (FOMC) early in December, followed by another increase in January.

Debates are raging within the Fed regarding the necessity of more aggressive action, following the release of inflation data this week, which exceeded forecasts. Core inflation rose 0.3% in October, a figure that some, like Governor Christopher Waller, believe is sufficient to justify a 50 basis point increase in December.

However, other officials, including Beth Hammack, president of the Federal Reserve Bank of Cleveland, advocate for a more gradual approach to allow the economy to adapt to higher borrowing costs.

Asked about the impact of inflation on the cost of living, Williams recalled that the central bank could not influence the absolute level of prices, but rather the pace of their evolution. He added that attempting to reverse the effects of a period of inflation could lead to significant economic distortions.

“It has consequences,” he concluded, referring to the increase in the cost of living that many economic actors have had to endure in recent years.