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The recent spike in inflation is “mostly due to” temporary factors, and inflation should return to the central bank’s 2% target next year, said New York Fed President John Williams on Monday.
“My view is that the spike in inflation mostly reflects the temporary effects of the surprisingly rapid opening of the economy,” Williams said, during a webconference with the Midsize Bank Coalition of America.
“Once these prices have fully adjusted to the reopening economy, they shouldn’t continue to increase at recent elevated rates, and their effect on overall inflation should subside,” he added.
Williams said inflation will come down close to 2% next year and 2023 from around 3% this year.
Williams said the longer-term trends that have held inflation down over the past decade would reassert themselves.
Williams is seen as a close ally of Fed Chairman Jerome Powell. The New York leadership position comes with a perennial vote at Fed interest-rate committee meetings. Consequently, his view carries more weight among some Fed watchers.
Data released at last week’s Fed meeting showed that central bank officials are split about the outlook.
Earlier Monday, two regional Fed bank presidents — Dallas Fed President Robert Kaplan and St. Louis Fed President James Bullard — said they thought inflation would stay elevated next year and they pushed for a conversation among their colleagues about tapering the central bank’s asset purchases.
Stocks were trading sharply higher on Monday after declining last week. The Dow Jones Industrial Average
DJIA,
was up 574 points in late-day trading.
