New York Fed president indicates ‘somewhat higher path’ for rate hikes

Yahoo Finance Fed reporter Jeniffer Schonberger details recent sentiments on interest rate hikes communicated from Federal Reserve officials.

Video transcript

DAVE BRIGGS: When will the Federal Reserve take their foot off the gas? We won't officially know that until Jerome Powell's next move until his next news conference. That's two weeks from Wednesday. But we are getting hints this week from Fed officials and Powell himself when he speaks at the Brookings Institute on Wednesday. Jen Schonberger has the latest Fed speak for us and what it means. Hi there, Jen. What did we hear?

JENNIFER SCHONBERGER: Good afternoon, Dave. Well, before we hear from the Fed Chair later this week, we did hear from New York Fed President John Williams, who says there is still work to do when it comes to raising rates, and that he sees a, quote, "somewhat higher path" for rate hikes than previously projected in September. Speaking with reporters following a speech at the Economic Club of New York, Williams also said he expects the central bank will hold rates at a peak level through at least next year. So until 2024.

Now, the Fed official said he sees signs inflation is starting to come down. But he says it will take time to bring underlying inflation down. He's projecting inflation will slow from its current rate of between 5% to 5 and 1/2% at the end of the year to 3% to 3 and 1/2% next year, though, of course, that's still above the Fed's 2% target.

And while Williams' baseline scenario is that the economy will grow below trend and avoid recession, he says the risk of a negative shock occurring and causing the economy to tip into recession is, quote, "mathematically greater," especially given uncertainty about the global economic outlook.

Now echoing Williams' sentiment that there's still work to do, this morning, we heard from St. Louis Fed President James Bullard, who told MarketWatch the Fed still has a ways to go and that financial markets are underestimating the chances policymakers will need to be more aggressive next year and raising rates to combat inflation.

Bullard reiterated that the Fed needs to raise rates to a range of at least 5 to 5 and 1/4. Now the benchmark policy interest rate now rests between 3.75% to 4%. Investors widely expect the Fed to raise rates by 50 basis points at the December meeting. That would be a bit of a slowdown from the 75 basis point pace we've seen for the last four meetings. Dave.

JARED BLIKRE: All right, I'll take this. And we definitely saw some stock movement on that. Thank you for that report, Jen Schonberger.