Fed policymaker Williams says another rate hike this year is "reasonable" as inflation is the main obstacle

Fed policymaker Williams says another rate hike this year is "reasonable" as inflation is the main obstacle

Summary

- New York Fed president Williams says that labour market risks have eased, leaving inflation and another Fed rate hike firmly in focus

Williams is offering up a fairly straightforward assessment of the US economy and the policy outlook today. His key comments:

- The US economy has shown remarkable resilience

- The downside risks to achieve maximum employment have diminished

- The biggest obstacle now is inflation

- The Fed's aim is to return inflation to target promptly

- It seems "reasonable" to implement another rate hike by the end of the year

- The era of explicit and direct forward guidance is over

- We do not know if higher yields will continue to persist

The key takeaway for me is how Williams is framing the balance of risks. The Fed had already raised interest rates by 25 bps last week to 3.75% to 4.00%, reinforcing a "timelier" return towards returning inflation to the 2% target in its statement. And Williams' remarks mainly reinforce that sentiment.

The signal here is that if policymakers are less worried about employment deteriorating, there is simply more...