Williams Says Fed May Need to Let Prices Overshoot to Boost Jobs

Federal Reserve Bank of San Francisco President John Williams said that in times of high long-term joblessness, central bankers should try to achieve full employment by letting inflation exceed their target.

“Faced with high long-term unemployment following the Great Recession, optimal monetary policy would allow inflation to overshoot its target more than in standard models,” Williams said in a paper co-written with Glenn Rudebusch, the Fed district bank’s research director. Williams doesn’t vote on policy this year.