john c williams : peeling the inflation onion, revisited remarks ( virtual ) by mr john c williams, president and chief executive officer of the federal reserve bank of new york, prepared for a regional visit to long island, 29 september 2023. * * * the federal reserve has two main monetary policy goals, often referred to as the " dual mandate " : maximum employment and price stability. as i will discuss in more detail, we are doing well on our maximum employment mandate, but we still have a ways to go to fully restore price stability. although inflation has come down from the peak reached last year, it is still too high. price stability is the bedrock upon which our economic prosperity and stability stands. the federal open market committee ( fomc ) has set a 2 percent longer - run goal for inflation and is committed to attaining that goal on a sustained basis. 1 before i go any further, i must give the standard fed disclaimer that the views i express today are mine alone and do not necessarily reflect those of the fomc or others in the federal reserve system. the inflation onion after peaking at just over 7 percent in june of last year, inflation is now 3 - 1 / 2 percent, based on the 12 - month percent change in the personal consumption expenditures price index. to understand why inflation rose so much and how it's coming back down, i find it useful to use the metaphor of an onion with various " layers " of inflation. 2 the outer layer of the onion consists of prices of globally traded commodities - lumber, steel, grains, and oil. the pandemic caused global demand for commodities to skyrocket. russia's war against ukraine set off a second sharp rise in commodity prices. since then, global demand has come into better balance with supply, and inflation in this layer has come down significantly. to give an idea of how big the swings in these inflation rates have been, food price inflation soared to over 10 percent and energy price inflation skyrocketed to over 40 percent in june of last year. over the past 12 months, as supply - demand imbalances receded, food price inflation dropped to about 3 percent, and, despite the recent rebound in oil and gasoline prices, energy prices have declined by about 3 - 1 / 2 percent. the middle layer of the onion is made up of goods like appliances, furniture, and cars. in the pandemic and its aftermath, demand for goods rose, supply - chain

to benefit consumers and enhance competition in the market. this framework was very well received by the banks and we look forward to their continuing support towards improving the efficient and effective transmission of interest rates in the market. reducing the costs of bank intermediation is another important area that the reserve bank is pursuing and i am pleased to say that work by a recently established joint abif / rbf committee to drive the atm / eftpos interchange project, is progressing well and work on this is expected to be completed by the end of this year. ladies and gentlemen, we have weathered the storm of the global financial crisis coupled with several natural disasters over the last 3 years and are expected to recover from this year onwards. partnership between all stakeholders to ensuring practical solutions are carried out to build our economy and nation is critical. while much has been done in recent times, a huge part of our growth potential is still at stake should we become complacent. as you know, the reserve bank has clearly ventured outside the domain of central banking, in support of government reforms and policies to move the economy forward. we hope that, as partners with the government and the reserve bank, you will continue the momentum with which you have worked, to help take fiji forward towards economic and financial prosperity. thank you.