Federal Reserve Williams: Inflation is expected to slow, and if this is not achieved, the Fed will take action

On 3 August, the Federal Reserve, William Williams, stated that he remained optimistic that inflationary pressures would gradually ease, but that, if that were not the case, the Federal Reserve would not hesitate to ensure that price pressures returned to target levels by increasing interest rates. In an interview with Reuters last Friday, Williams said that if energy prices and trade tariffs had peaked and the economy had remained robust, “I think that some of the `principal factors driving inflation' in the past year and a half will no longer play such a role, and that `some of the forces of inflation fall that we have observed before' should re-emerge.” He added: “I am following very carefully the changes in core inflation data over the coming months, and I am concerned that this is consistent with the trend towards a 2 per cent convergence of inflation and a sustained downward trend, thus ensuring that we can achieve a long-term stable 2 per cent inflation target by 2028.” He added: “I personally predict that inflation will decline in the second half of this year and fall further next year.” Williams reiterated that the current interest rate policy position “is in a favourable position” to bring inflation back to the target level. But he pointed out: “If we are not on track to reduce inflation to 2 per cent then it is entirely appropriate to take action to bring us back to the 2 per cent inflation track.”