Fed's 'Third-in-Command' Backs Holding Steady: Inflation 'Absolutely Too High,' but Other Indicators Not Yet Flashing Warnings

As the Fed's "third-in-command" and New York Fed President with a permanent vote, Williams said he endorses the Fed's earlier statement that now is the time to gather information on price risks. Speaking Friday at an event hosted by the European Central Bank (ECB) in Frankfurt, Williams said inflation is "absolutely too high," but other indicators have so far not flashed worrying signals. Monetary policy "does play a key role in ensuring these relative price shocks do not morph into broader or more persistent inflation," Williams said. "Inflation expectations remain firmly anchored. The wage growth we are seeing is consistent with the 2% target." Fed officials held rates steady last month, saying "accumulating more information" would help them judge the best level of policy. The hold decision, passed by a 10-2 vote, followed a unanimous September agreement to raise the benchmark rate by 25 basis points to a target range of 3.75% to 4%. Since that meeting, several policymakers have stressed in public remarks the need for further rate hikes, but advocated a gradual approach. Those public statements came after remarks by Chair Kevin Warsh, who pointed to strong economic performance and warned about persistent inflation, but still did not reveal his view on the rate path. "I think the FOMC statement from our last meeting accurately indicated that now is the appropriate time to accumulate more information to help us judge what policy stance is appropriate, so as to ensure inflation returns to the 2% target in a timely manner," Williams said. The Fed's preferred inflation gauge the personal consumption expenditures (PCE) price index rose 3.6% year-on-year in September, with the core measure excluding food and energy also rising in tandem. Data also showed the U.S. economy grew at its fastest pace in a year in the quarter through September. "There are a few themes that are really interesting, both for us and globally: a very rare set of relative price shocks is hitting economies, and at the same time, at least our economy has shown strong resilience through these shocks," Williams noted. His remarks came days after U.S. Democrats won a decisive victory in Tuesday's midterm elections, seizing control of Congress. Fed watchers say the shift could provide protection for the central bank, giving officials more room to fight inflation free from political interference.