Fed’s Williams (non-voter): Too much growth could spur asset bubble and high inflation; we've exceeded full employment mark; expansion appears to remain on track
- Sees inflation rising to 2%, sees unemployment declining to a bit below 4%- US economy is on track despite the hurricanes
- Fed in the future will rely on more unconventional tools
- As Fed unwinds the balance sheet, it should put more upward pressure on longer term Treasury yields- Sees economy continuing on same moderate path over next few years
- Fed is moving towards more normal monetary policy, and that means rising interest rates; But r-star, a slower sustainable pace of growth, and inflation all point to a new normal where interest rates are lower than the heady days of the 1990s and early 2000s
- The new normal is likely to be 2.5 percent, and banks, and everyone else, need to prepare accordingly
- Expects future normal spread between 10yr Treasury note and fed fund rate somewhere closer to 1 percentage point