John Williams of the New York Fed, who is speaking at a banking conference has stated that inflation is likely to rise to 3% this year before falling to around 2% in 2022.
Williams predicts that US GDP will expand 7% in 2021 year-over-year.
He said the economy has not improved enough to reduce policy stimulus.
Impact of the US dollar
There has been little forex reaction to the comments as the US dollar has already given up some ground, but the DXY has remained above where it was trading prior to the Fed’s statement on Wednesday.
His comments are joined today by those of St. Louis Fed Chairman James Bullard, who has cited the “upside risk” of potential inflation and said the central bank will have to remain “nimble” as the US economy reopens. after the COVID pandemic.
He also said that he does not see how rates can be substantially higher than in the EU or Japan.
He said the Fed’s eventual phase-down strategy would have to involve constant monitoring of incoming data, rather than going on “automatic pilot.”
Policymakers, including Boston Fed Chief Eric Rosengren, are among the many other officials who spoke this week who may provide further clarity after James Bullard of St. Louis said last week that rates interest rates may have to rise in 2022.
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