John Williams, President of the Federal Reserve Bank of New York, Interview with the Financial Times
There has been a warning that the widening wealth gap in the United States could lead to an economic downturn. This was stated by John Williams, President of the Federal Reserve Bank of New York, in an interview with the Financial Times (FT).
According to the Financial Times on November 9 (local time), President Williams said, "As the burden of living expenses and housing costs increases, low- and middle-income households are finding themselves living paycheck to paycheck," adding, "The weakening purchasing power of these groups could undermine consumer spending and economic confidence."
President Williams also serves as Vice Chair of the Federal Open Market Committee (FOMC), and his remarks come as the Federal Reserve weighs whether to cut the benchmark interest rate again in December.
There is considerable evidence that low- and middle-income households in the United States are facing certain constraints in terms of their financial capacity, while the wealthy are enjoying the benefits of a booming stock market. President Williams pointed out, "Consumer confidence could be shaken, and the current growth in consumption may not be as robust as it appears."
President Williams also indicated that he would take this wealth gap into account when deciding whether to lower interest rates. He suggested that this 'divided' behavior among American households could be a factor in the Federal Reserve's decision on whether to cut rates next month.
He made it clear that he opposes the proposal raised by Lorie Logan, President of the Dallas Federal Reserve, to link the benchmark interest rate to the ultra-short-term funding market (repo market) in order to reflect actual market rate changes more quickly. President Williams emphasized, "After multiple discussions, the decision to maintain the federal funds rate as the policy rate remains valid."
He went on to say, "The deepening wealth gap and the burden of high interest rates could lead to an economic slowdown," adding, "Policymakers need to consider not only price stability but also inclusive growth."
The Federal Reserve will hold its final Federal Open Market Committee (FOMC) meeting of the year on December 9-10 to decide on interest rates. The Fed cut the benchmark interest rate by 0.25 percentage points in September and again on October 29, marking two consecutive reductions.
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