(Bloomberg) — Federal Reserve Bank of New York President John Williams said there is still a lot of work to do on inflation given high energy prices and demand driven by investment in artificial intelligence.
Williams said market expectations for another interest-rate hike by the end of the year is a "reasonable way of thinking about it, but we'll have to see."
He said the U.S. economy has shown "remarkable resilience despite significant shocks" and the labor market is "solid." However, he pointed to lingering
"That's the job: we still have a lot of work to do," he said Thursday during an event in London. "Inflation's been above target for five years."
US inflation held above target at 3.4% in August with a key measure excluding food and energy
Fed officials voted unanimously last week to raise their benchmark interest rate by a quarter percentage point to a range of 3.75% to 4%. Chairman Kevin Warsh said the decision aimed to remove a "dose of accommodation" from the economy in an effort to tame inflation back to the central bank's 2% goal. Since then, several policymakers have argued higher rates might be needed. A majority of officials expect one more quarter-point hike this year, according to the central bank's updated economic projections.
Read more:
What comes next for banks in a post-CLARITY Congress Warsh: Rising bond yields a sign of strong U.S. economy Borrowing from Federal Home Loan banks jumped 20% in 2Q State bank examiners get a playbook for inspecting AI
Williams sounded optimistic on the prospect of a productivity boom driven by AI, though he warned the gains may not be shared equally if the technology is dominated by a few large firms.
"With AI investment, I expect productivity growth to pick up in the coming years," he said. While productivity gains could reach the levels seen before the financial crisis, Williams added that AI is only a small factor currently.
On the neutral interest rate — the level at which policy is neither dragging down inflation nor boosting it — Williams said there is a "tug of war" between fiscal policy and higher economic growth versus factors such as demographics that are weighing down on the measure.
