May 20, 2022
New York Federal Reserve President John Williams

New York Federal Reserve President John Williams has said that he doesn’t believe high levels of fiscal support and stimulus measures from the US government pose a risk to the economy, citing employment and inflation levels as proof the policies were working.

With stocks pushing to new all-time highs whilst corporate bond yields plunge, the central bank official also said he believes current asset prices to be justified in light of economic growth and low interest rates.

“The economy has quite a ways to go to get back to maximum employment, and we have a ways to go to get back to our 2% inflation target, so I’m not really concerned about stimulus, about fiscal support right now being excessive or anything like that,” said Williams, speaking to CNBC.

“The economy has been in a very slow period due to the winter wave of COVID, spread of COVID, so right now I am in a wait-and-see mode and we are going to watch the data and see how the economy does and specifically focusing on the progress on our two goals and make the decisions that are appropriate to achieve those goals.”

Fed policies of low interest rates and continued asset purchases have been a factor in driving up prices of risky assets. Some analysts have warned that continued risk-taking could create potential for the financial system, but Williams sees unworried at this point.

“Market participants and investors around the world are looking ahead through this year and looking into an economy that hopefully have a pretty robust recovery and a strong expansion over the next several years, which would support stronger valuations” he said, adding that he didn’t see evidence of prices running out of control.

The comments suggest a continuation of fiscal support measures for at least the near future, despite warnings from some that such a policy is likely to cause inflation to rise sharply. The issue divides analysts, with a number holding the position that such measures are necessary in the face of unprecedented circumstances.