New York Fed President John Williams said allowing “moderate” inflation overshoot “isn’t a number”. But it’s a “guard rail” against expectations that very persistently high inflation would be tolerated. And, “it’s also about proportionality”. “There’s flexibility, and there’s some discretion around that,” he added. “It is specific to the circumstances, and I would also say it is specific to where the economy is.”
Williams also reiterated that the economic outlook is “highly uncertain”. Fiscal policy actions can be very helpful in the short-run. As some parts of the economy have not recovered nearly as much, “target fiscal support would be helpful”.
