NEW YORK (Reuters) - It could take a few years for the U.S. economy to recover from the damage caused by the coronavirus pandemic, and it is not yet the time to think about raising interest rates, New York Fed President John Williams said on Thursday.
“This is not the time to think about liftoff or normalization,” Williams said during an interview with Yahoo Finance.
The virus has created an “enormous amount of uncertainty” and even if the U.S. economy begins to recover in the second half of 2020, it may take some time for the economy to come out of a “very deep hole.”
“We have a long ways to go to get back to full strength,” Williams said.
The rebound is starting to stall in states where the number of coronavirus cases is rising, a trend that is causing people to cut down on trips to restaurants and other activities, Williams said.
Fiscal stimulus delivered to households and businesses in the form of cash transfers or grants have been effective at supporting workers and small businesses, Williams said.
Williams reiterated the Fed’s goal of hitting its 2% inflation target, but said it could be challenging at a time when rates are low.
“The goal here is we want inflation to be anchored at 2%,” Williams said.
“That’s been harder to do than to say and I would argue that much of that is because of this issue of the lower bound on interest rates and the limited ability in a global situation of very low interest rates to really provide accommodation and stimulus as needed.”
Asked about the potential use of yield curve control to target rates at specific maturities, Williams said it would best be used in situations where forward guidance wasn’t being as effective as Fed officials would like.
Reporting by Jonnelle Marte; Editing by Chris Reese and Jonathan Oatis