Inflation in the United States is becoming more broad based and expectations for future price increases are rising, a trend policymakers will be watching closely, New York Federal Reserve Bank President John Williams said on Thursday.
While some of the price increases seen today are related to the pandemic and imbalances between supply and demand, there have also been increases in other areas such as shelter, Williams said.
“We definitely have seen a pickup in underlying inflation in the U.S. that we'll be studying carefully,” Williams said during a virtual panel with European Central Bank (ECB) chief economist Philip Lane.
A rise in short-run and long-run inflation expectations are a “positive” development, because expectations have reversed some of their previous declines. But officials would not want long-run inflation expectations to move up significantly more, Williams said.
The U.S. economy is “roaring” back after being disrupted by the pandemic and a “unique set of circumstances” is leading to changes between supply and demand, he said.
“I do think our framework is well suited for this because it does again start from this point of we want to make sure inflation expectations are well anchored at 2 percent over time,” Williams said.
Asked about the role of a potential central bank digital currency, Williams said the Fed is in “study mode” and trying to better understand the technology that could be used and the policy questions that need to be addressed regarding a CBDC.
“I think it’s early days to think through all these issues,” Williams said. “I also think they’re very closely connected to what happens out there in the world of cryptocurrencies, stablecoins and things like that.”
