Williams Says Fed’s Rate Liftoff Is Still Way Off in the Future

© Reuters. Williams Says Fed’s Rate Liftoff Is Still Way Off in the Future

(Bloomberg) -- A discussion about raising interest rates is still quite a ways away as the Federal Reserve begins debating tapering its bond-buying program, New York Fed President John Williams said.

“That’s still way off in the future,” Williams said of rate hikes during a Bloomberg Television interview on Tuesday with Michael McKee and Jonathan Ferro. “Right now, really, I think the attention is on the taper.”

The U.S. central bank’s policy-setting Federal Open Market Committee, on which Williams sits, is debating when it will be appropriate to begin scaling back the bond buying program it put in place last year at the outset of the pandemic.

The Fed is currently purchasing $120 billion of Treasuries and agency mortgage-backed securities per month, and officials have said it will continue buying at that pace until the economy has made “substantial further progress” toward its employment and inflation goals.

At the conclusion of a two-day policy meeting on June 16, the FOMC published updated quarterly projections showing the majority of policy makers expected it would be appropriate to begin raising the central bank’s benchmark federal funds rate from its current near-zero level sometime in 2023. Seven of 18 on the committee expected it would be appropriate to begin raising the rate as soon as next year.

“I think our FOMC guidance around the fed funds rate is a very strong place to be,” Williams said -- referring to the central bank’s policy statement, which says it will hold the rate near zero until the economy has returned to maximum employment and inflation has risen to 2% and is on track to moderately exceed that level for some time.

“When we get to that point where the economy is meeting those conditions that we’ve laid out in the FOMC statement, that’s when we’ll get to the discussion about whether the fed funds rate -- what’s the appropriate stance of the fed funds rate,” Williams said. “That’s still quite a ways off from today.”

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