John C Williams: Our work Is not yet done Remarks by Mr John C Williams, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the New York Bankers Association, New York City, 14 February 2023. ***  As prepared for delivery Thank you, Tom. It's a pleasure to share the stage with you today. As a member of the New York Fed's Board of Directors, Tom Murphy represents the Federal Reserve's Second District. Our directors ensure that a diversity of viewpoints on economic and banking conditions are represented, so we can better understand and anticipate developments in our economy, both locally and nationally. As you well know, a lot has occurred since Tom joined our board two years ago. And we have benefited immensely from his thoughtful insights and perspectives. Today, it should come as no surprise that I'll be spending much of my time discussing inflation, which remains my No. 1 concern. I'll also talk about how we are using our monetary policy tools to restore price stability. And, I'll give you my economic outlook. Before I go further, I'd like to do three things: First and foremost, I want to thank the New York Bankers Association for inviting me here. Second, I need to give the standard Fed disclaimer that the views I express today are mine alone and do not necessarily reflect those of the Federal Open Market Committee (FOMC) or others in the Federal Reserve System.
In addition, the severe supply-chain bottlenecks that initially affected this category began to improve last year, which likely contributed to the easing of prices for some durable goods in recent months. However, there are factors that may throw sand in this gear going forward. The economic resiliency of Europe and a rebound in growth in China following the end of COVID restrictions will likely increase global demand for goods. And further improvement in global supply-chain disruptions has stalled over the past few months. For example, the New York Fed's Global Supply Chain Pressure Index remains elevated relative to pre-pandemic levels. The slowest gear to turn is the one that represents non-energy services. It's influenced by the balance of overall supply and demand, and it will take the longest to rotate at the right pace for low and stable inflation. One area where we are seeing signs of this gear turning is in shelter costs. After a sharp rise, we have seen a steep decline in the rate of increase in new lease rents. Assuming this trend continues, we should see a slowing of overall rent inflation during this year. That said, we have yet to see the gears turn for inflation of non-energy services excluding housing, which is still quite elevated, averaging 3-3/4 percent over the most recent six months. Tightening Monetary Policy Taking into account the different speeds the gears are moving, it is clear that overall demand remains well in excess of supply, and inflation is running far above our 2 percent target.