21 Jun FRB – Fed (NY) President and CEO John C. Williams spoke at Midsize Bank Coalition of America regarding transition away from the LIBOR rate and economic recovery
June 21, 2021 – Noted that there are about six months remaining until the permanent move off of LIBOR. At the Financial Stability Oversight Committee (FSOC) meeting, members noted risks of potential rates that share LIBOR’s problems, like thinly traded market bases. Alternative Reference Rates Committee studied this, consulted with the public, and recommended Secured Overnight Financing Rate (SOFR) as a main USD reference rate. Importantly, SOFR was resilient even during the market stress at the height of the pandemic last spring and will provide a rock-solid foundation for the post-LIBOR world. Much progress has been made in the transition away from LIBOR, limited time remans, so each entity’s transition off of LIBOR should happen as soon as practically possible.
Williams also touched on the economic outlook and post-pandemic economic recovery. Expects inflation-adjusted, or real, GDP to increase seven percent this year. If that forecast comes true, that would be the fastest year-over-year growth rate since 1984. Views the spike in inflation to reflects temporary effects of the rapid opening of the economy. Believes that as price reversals, short-run imbalances from reopening play out, inflation will go from around 3 percent this year to 2 percent in 2022 and 2023.
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