John Williams was named Tuesday as the next president of the Federal Reserve Bank of New York, succeeding William Dudley. He brings with him monetary-policy chops, a long history at the central bank and some notable quirks.
Over the years, his public speeches have yielded a few key insights about the 55-year-old economist, who is taking over one of the most important roles in the global financial system.
The job carries a permanent vote on interest-rate decisions and traditionally the vice chairmanship of the Federal Open Market Committee; a direct line to Wall Street’s biggest banks and brokers; and a front-row seat among international bank regulators. Williams, who currently leads the Fed’s San Francisco bank, starts in New York on June 18.
1. Hard to Label
Though he was viewed as a monetary-policy dove in the early days of his seven-year tenure at San Francisco’s helm, Williams was more recently labeled hawkish: mid-2016 found him pushing for two or three rate increases (the Fed made one) and in mid-2015 he was calling for two (the Fed made one that year as well).
But his prescriptions were pretty consistent with what his colleagues were laying out in their quarterly economic projections, and that remains the case.
Williams is currently saying three to four quarter-point rate hikes would be appropriate this year, which would place him smack in the middle of the forecast range that officials updated in March. He always emphasizes the importance of being data-dependent, and his views shift slowly.
As you might expect of a centrist, Williams has never dissented from a Fed decision.
2. Fed Veteran
Williams has spent almost his entire career at the Fed, as the timeline below shows. Former Fed Chair Janet Yellen made him San Francisco’s research director when she was president of the regional bank, and he succeeded her into the top job in 2011.
He’s co-authored influential work with two of the most widely-cited researchers within the Fed system: Thomas Laubach, now director of the Fed Board’s monetary affairs division, and David Reifschneider, formerly Yellen’s personal economic adviser.
3. R-star and the Rethink
Fed officials have increasingly leaned on the concept of a “neutral” interest rate in their communications about their policy strategy.
The idea is that interest rates will stimulate economic growth until they are raised above the neutral rate, which is known in the economics lingo as “r-star.” And Williams literally has his name on it: the formula he originally developed in a 2001 paper with Laubach is the most commonly-cited estimate of the neutral rate.The Laubach-Williams model suggests the neutral rate has fallen significantly since the financial crisis, and may not be going back up again any time soon.
That’s why Williams has become increasingly associated with another big idea shaping the policy debate at the moment: if the neutral interest rate is so much lower now than it was historically, maybe the Fed should consider raising its inflation target.
Higher inflation would lead to higher interest rates than otherwise, which would allow the Fed more room than they have now to cut rates in response to future economic downturns.
4. Not a Banker
Williams’s past doesn’t include stints in the financial industry. That could help him avoid a frequent criticism: that Fed officials are too close to the firms they oversee. That complaint was sometimes levied against Dudley, who came to the central bank from Goldman Sachs.
But a lack of banking ties may have drawbacks. The New York Fed president sits at the intersection of financial markets and the economy, communicates regularly with the largest banks in the U.S., and, in Dudley’s case, brought real-world experience to the position.
Williams likes to make the point that he doesn’t have a Bloomberg terminal on his desk — the implication being that he goes out of his way to avoid paying attention to short-term swings in the markets.
That’s not necessarily a bad thing, but it will probably have to change for a role that oversees Wall Street. The last New York Fed president to make a similar leap was Gerald Corrigan, who moved from the Minneapolis Fed to the Big Apple in 1985.
5. Quirky Character
Williams, who waxed romantic on the benefits of island garb during a recent appearance in Hawaii, likes to give speeches filled with song references — rock band Green Day is one example — which is pretty unusual for a Fed official. He also loves to play video games (Dark Souls is his favorite) and he’s an avid fiction reader.
Another fun fact: John Taylor — a vocal critic of Fed policy in recent years who’s also famous for creating a widely-used monetary-policy rule — was Williams’s thesis adviser at Stanford University, where he earned his Ph.D. Williams, who’s married with two sons, is originally from Sacramento, and his father served as an adviser to four consecutive California governors.