US: Fed not ruling out further rate hikes, according to John Williams

The U.S. central bank has not ruled out further rate hikes at its next meeting, one of its officials said on Tuesday, marking a change in tone and hinting at a break a week after the meeting.

“We’re not saying we’ve raised rates,” New York Fed President John Williams said.

“We have not decided what we are going to do in our next meetings, (..) the evolution of the economy will obviously affect our decisions,” he said, before the Economic Club of New York.

The central bank raised rates by a quarter point on Wednesday after its last meeting. This rate increase increases the cost of loans to households and firms to slow activity and control inflation.

The monetary agency changed its tone compared to previous meetings, suggesting it could signal a break after ten consecutive hikes.

It will take months before the effects of these measures are felt in the real economy. Also, recently, the banking crisis has created additional difficulties for borrowers, as banks make it easier to lend to their customers, which acts as a rate hike.

The next Fed meeting is June 13-14. “We will make a decision at that time,” said the president of the New York Fed, which has permanent voting rights at these meetings.

He also believes that the central bank will have to “keep an accommodative policy for some time to ensure that inflation is really brought down” to bring inflation back to the 2.00% target.

“So I don’t see (…) any reason to cut interest rates this year,” he warned.

The central bank has raised its key policy rate by 5 basis points from March 2022 to 5.00-5.25%, from a range of 0-0.25% since the start of the pandemic.

“I think we’ve made incredible progress over the last year. Taking interest rates from near zero to 5.00% brings them to a position that will “help reduce inflation.

John Williams predicts “very moderate growth” for the US for 2023, but “no recession”.