Federal Reserve Bank of New York President John Williams said a half-percentage-point increase in interest rates is an option if warranted by the data, joining other officials in putting such a move on the table.
“If it’s appropriate to raise interest rates by 50 basis points at a meeting, then I would think that we should do that. If it’s appropriate to do 25, then we should do that,” Williams said Friday during a virtual central banking panel moderated by Bloomberg’s Francine Lacqua. “I don’t see any reason not to do one or the other, it’s just we need to make the right decisions based on what we’re seeing in the economy.”
Williams’s comments come after Fed officials raised rates by a quarter point last week for the first time since 2018 and projected six more such hikes this year to reach 1.9%.
Investors have increased their bets on a half-percentage point hike at the Fed’s May 3-4 meeting after Chair Jerome Powell said on Monday the central bank was prepared to do so if needed to get inflation under control.
Several central bankers have also voiced support for moving by a half point, including St. Louis Fed President James Bullard — who wants rates above 3% by year-end — and Cleveland Fed President Loretta Mester, who favors getting them to 2.5%. Atlanta Fed President Raphael Bostic, however, said he favors a less aggressive approach this year due to uncertainty following Russia’s invasion of Ukraine, though he could be persuaded to go faster if needed.
Officials have pivoted sharply in recent months to confront too-hot inflation. The consumer price index soared 7.9% in February, the most since 1982; the Fed’s 2% inflation target is based on a separate gauge, the personal consumption expenditures price index, which rose 6.1% in the 12 months through January.
Williams also said that despite very high inflation readings, longer and medium-term inflation expectations “have stayed remarkably stable,” while cautioning that “policy actions have to reinforce that equilibrium.”
He also noted that while Fed actions are felt far afield and care to communicate clearly was needed to avoid unintended spillovers or volatility, tighter policy both in the U.S. and elsewhere had so far not unsettled investors.
“While we’ve seen a shift in both current and expected monetary policy, we’ve seen very relatively small disruptions in global financial markets,” Williams said.
