Fed officials see inflation fight lasting through 2024

Two members of the Federal Open Market Committee said today that the committee is likely to raise the federal funds rate again in the future and perhaps maintain a restrictive policy stance into 2024. In an interview with Bloomberg Marketplace, St. Louis Fed President James Bullard said the rate has only recently moved into restrictive territory “and we’re going to have to move farther to keep inflation under control.”

“I think we are going to have to stay there in 2023 and into 2024 given the historical trend of core PCE inflation or Dallas trimmed mean inflation,” Bullard said. “They will come down… but they probably won’t come down as fast as markets would like.”

New York Fed President John Williams said there “is still more work to do” during a speech to the Economic Club of New York. However, he added that the Fed’s tighter monetary policy is having an effect. “Broad measures of financial conditions, including borrowing and mortgage rates and equity prices, have become significantly less supportive of spending. This has led to a decline in activity in the housing market and signs of general slowing in consumer expenditures and business investment spending.”

Williams said he expects real GDP to increase only modestly this year and in 2023. He anticipates that the unemployment rate will climb from its current level of 3.7% to between 4.5% and 5% by the end of next year. He also expects inflation to slow from its current rate to between 5% and 5.5% at the end of this year, and between 3% to 3.5% next year. “Further tightening of monetary policy should help restore balance between demand and supply and bring inflation back to 2% over the next few years,” he said.