Fed's Williams Optimistic for a Rebound, But Uncertain on Pace

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Sergey Golubev
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Sergey Golubev  

Fed's Williams Optimistic for a Rebound, But Uncertain on Pace

Federal Reserve Bank of New York President John Williams said Thursday it is unclear when the U.S. economy will fully recover from the coronavirus pandemic, adding that the central bank will do all it can to help the country navigate the crisis.

With the economic outlook hinging on how the virus is contained, "it's impossible to know exactly how and when workers and businesses will be fully back to work and when consumers will return to the businesses that are open," Mr. Williams said in the text of a speech.

"It's going to take a while for the economy to get back to full strength. I don't know exactly how long that will be or exactly how that will develop," the central-bank official said. But with aggressive Fed and government support, he said he is confident that the strong economy seen at the start of the year, with very low levels of unemployment, can be reattained.

Mr. Williams declined to say whether the U.S. could experience a V-shaped recovery. "Don't get into that letter game. Whatever you think will happen, you'll get it wrong," he said.

The official, however, said he believes the makings for a good rebound are nevertheless there.

"I don't think anything has fundamentally changed," Mr. Williams said. "Our economy can still provide those jobs, get to the unemployment rates of 3 1/2 percent, get to the kind of growth we were seeing. It's going to take some time and it may take a few years to get back to that, and from my point of view monetary policy can play that role of helping along the way."

He said that April's unemployment rate, at 14.7%, was "a figure I hoped that I would never see in my lifetime, and one that is sure to get worse before it gets better."

"Amid all the change we're experiencing, you can be assured of one thing: our unwavering commitment to limit the economic damage from the pandemic and foster conditions for a strong and sustained recovery," Mr. Williams said.

The official serves as vice chairman of the rate setting Federal Open Market Committee. In response to the crisis, the Fed has slashed its interest-rate target to near zero, ramped up asset buying to support markets, and launched many tools to help extend credit to the economy.

Mr. Williams said the Fed is "not going to raise interest rates any time soon." He also said that negative rates isn't something the Fed is likely to turn to any time soon, if at all. "We have the tools without going to negative interest rates. We are going to use, to deploy those tools effectively and powerfully as we can."

"We are taking rapid and significant actions to supply liquidity and to stabilize critical parts of our financial system," Mr. Williams said, adding that the work the central bank has done has helped improve functioning in financial markets.

Mr. Williams also flagged the importance of the government's efforts. "Fiscal policy is also a vital partner in the delivery of our own programs, supplying the financial support necessary for the extraordinary scale of the credit facilities we're operating," he said.

Mr. Williams said that he sees little inflation risk from aggressive central-bank actions and that he expects price pressures to be weak relative to the Fed's 2% inflation target.

He said a massive uptick in government borrowing isn't problematic right now. "There is enormous global demand for U.S. Treasury securities," Mr. Williams said. "I'm not so worried on long-term effects on U.S. interest rates because of higher deficits and debt right now."

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