What a difference one month makes in the views of John Williams

On March 23 it was “up, up and away”:

“Things are looking better–in fact, they’re looking downright good,” the official said in a speech to be delivered to an audience in Sydney and Melbourne via video.

Given how much the economy has improved and is likely to continue to gain ground, “I think that by mid-year it will be the time to have a discussion about starting to raise rates,” Mr. Williams said.

On April 20 another FOMCer is not so sure any longer:

Hopefully” the economic data will “support a decision to lift off later this year,” Mr. Dudley said, in reference to taking the first move to push interest rates off of their current near-zero levels.

But, “because the economic outlook is uncertain, I can’t tell you when normalization will occur,” he said. When it comes to rate rises, “the timing is data dependent. We will have to see what unfolds,” he said.

And on goes the FOMC, directionless!

PS Could have titled this post as “Random Walks at the FOMC”

6 thoughts on “What a difference one month makes in the views of John Williams

  1. Mr. Cole, I noticed that too, maybe he was just in a bad day and didn’t notice how his words came out, but, to say “i hope the economy will go in the direction we have already chosen for it” is incredible. How is that called… er, whishful thinking ?

  2. Mr. Robazzi: I am flattered to be mistaken for Marcus.

    Egads, all the FOMC can talk about is normalizing interest rates. “Interest-rate crackheads.” Shouldn’t they be talking about going back to QE?

    That is, based on slumping economic growth and inflation below target?

  3. Unfortunately this is one of the problems with inflation targeting, in my view. They believe in long and variable lags. That said, they think the output gap is closing, if they do nothing, therefore, they have to anticipate a move that will prevent the output gap (labor slack) from changing signals. The problem is that they don’t know for sure how much is the potential GDP, nor the NAIRU. They have a pretty good idea, but they don’t know for sure. The NAIRU was 6.5, then 5.5, now it is 5.2. And inflation is below target, and expected NGDP (hypermind´s) too. NGDP is so much better at policy stance indicator …

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