NY Fed’s Williams says new framework empowers central bank in low-rate environment

(C) Reuters. FILE PHOTO: John C. Williams, president and CEO of the Federal Reserve Bank of New York speaks to the Economic Club of New York in the Manhattan borough of New York

(Reuters) – Lower interest rates around the globe make it more difficult to use monetary policy to stimulate the economy, but the Federal Reserve’s new framework leaves the U.S. central bank better positioned to hit its goals on inflation and employment, New York Federal Reserve Bank President John Williams (NYSE:WMB) said on Wednesday.

The U.S. central bank announced a new strategy last week to target an average rate of inflation over time. The approach makes it clear that temporarily higher inflation is “desirable” to reach the average inflation target, and it clarifies that the Fed is focused on shortfalls in employment, Williams said in remarks prepared for the Bretton Woods Committee Webinar.

“These changes are mutually reinforcing and will meaningfully improve our ability to achieve both of our dual mandate goals in an environment of a very low neutral rate,” Williams said.