Bill Dudley Says Federal Reserve Risks Losing Credibility on Inflation Target

Bill Dudley said the Federal Reserve risks losing credibility after years of missing its 2% inflation target. Dudley stated that inflation has remained above target and long-term expectations have risen. S. growth has stayed strong even with high interest rates, suggesting policy may be less restrictive than assumed.

Dudley pointed to structural forces such as AI investment and high government debt as possible reasons the neutral rate has increased. He also noted that political pressure and leadership change add to uncertainty around future policy. Dudley warned that continued misses could cause inflation expectations to become unanchored.