(Reuters) – New York Federal Reserve Bank President John Williams on Tuesday said the central bank will likely need to get its policy rate above 3.5% to put downward pressure on inflation and bring demand into better line with constrained supply
Inflation is likely to be between 2.5% and 3% next year, he said, which suggests a Fed funds rate of 3%-3.5% would neither brake nor stimulate the economy. “My baseline kind of view would be yes, you do need to get a little bit or somewhat above that, because you’re trying to get that not just to neutral, the real interest rate, you’re actually trying to pull demand in line with supply,” Williams said in a webcast interview with the Wall Street Journal.
(Reporting by Ann Saphir and Lindsay Dunsmuir)
