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The Fed Is Now Relying on a Miracle to Save the Economy

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As president of the Federal Reserve Bank of New York and vice chair of the policy-setting Federal Open Market Committee, John Williams is perhaps the second-most influential US central banker behind Fed Chair Jerome Powell. There’s no doubt he is well-rooted in economic fundamentals. And yet, he expects the economy to perform nothing short of a miracle.

That was evident in a speech Williams gave to a virtual event hosted by the Economic Club of New York earlier this week. Williams predicted the Fed would need to continue raising interest rates into next year and possibly hold them at that higher level into 2024 to reign in the highest inflation in four decades. Pretty standard stuff. What he said next was not so standard. Williams added that the unemployment rate would likely drift up to a more sustainable range of 4.5% to 5% next year from the very tight current level of 3.7%, resulting in a…

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