NEW YORK (Reuters) – Inflation could be volatile in the near term as the economy recovers from the pandemic but overall price increases should remain subdued and the Federal Reserve knows how to act if inflation gets too high, New York Fed President John Williams said on Wednesday.
“We know how to deal with inflation,” Williams said during a virtual conversation with Rutgers University students. He expects inflation overall to stay near the Fed’s 2% target, he said.
“The economy is coming back pretty strong right now,” as more Americans are vaccinated against the coronavirus and supported by robust fiscal aid, Williams said.
However, the Fed official noted that unemployment is still high and the economy still has a long ways to go as it recovers. Some businesses are also overcoming bottlenecks due to supply disruptions or higher demands for certain goods, Williams said, citing a sporting goods store he visited that is sold out of bicycles.
It’s too soon to know how strongly travel will rebound or what share of people continue working from home, but some long-term damage may have been avoided, Williams said.
“There’s a lot of things that are uncertain, but I think the economy will be able to get back to full strength,” he said.
The pace of the economic recovery is accelerating and consumers are spending more on travel and other items, according to a report released Wednesday by the Fed. The economy in the New York Fed’s district “grew at a strong pace for the first time during the pandemic,” despite an increase in COVID-19 cases in the region, the regional bank reported.
Williams said new variants of the virus are still a risk. “We’re a little bit in a race between the vaccinations and the new variants of the coronavirus,” he said during the event.
(Reporting by Jonnelle Marte, Editing by Franklin Paul and Diane Craft)