Federal Reserve member says ‘not signs of rising inflation’ coming
In a speech defending the Federal Reserve‘s efforts to stimulate the economy in recent years, a central-bank official said inflation isn’t a threat, and described how monetary policy easing can lower the dollar.
“Inflation has been very low during this period of unconventional policies, and it remains so,” Federal Reserve Bank of San Francisco President John Williams said Monday. He added, “the public’s inflation expectations remain well anchored,” and said “we are not seeing signs of rising inflation on the horizon.”
Williams is a voting member of the monetary-policy-setting Federal Open Market Committee. His comments came from the text of a speech prepared for delivery before a gathering at the University of California, Irvine. The bulk of his formal remarks were devoted to describing and quantifying the influence of a host of unconventional policies the Fed has pursued since it cut short-term interest rates essentially to 0% at the end of 2008.
In his speech, Mr. Williams said lowering the dollar as part of a Fed stimulus program is “not our main intention.” But he noted that nevertheless, “one estimate is that a $600 billion program like QE2 causes the dollar to fall by roughly 3 or 4 percent.” He said “that helps stimulate the U.S. economy by making American goods more competitive at home and abroad.”
Mr. Williams didn’t offer many clues about what he thinks is coming next for the economy or monetary policy. He did say that if inflation were to flare, “the Fed has the tools to combat such a threat.”
“Most indications still point to an environment of heightened risk aversion rather than reckless risk-taking in our financial system,” Mr. Williams said. “If that situation were to change significantly, we could modify our unconventional policies to mitigate undesired effects on risk-taking,” he said.
