New York FED President John Williams expressed his views on the current economic situation in a recent statement. He acknowledged that inflation is still very high, but said he thinks it will start to slow down later this year.
Williams noted that there is ample evidence that monetary policy is restrictive and there has been no recent progress in reducing inflation. However, he noted that the Fed will continue to monitor all data to make informed decisions regarding monetary policy.
He noted that monetary policy remains restrictive on economic activity. Even so, he believes the risks to the Fed's ability to fulfill its mandate are moving toward a better balance. He also said he was confident the Fed's policy was well positioned to bring inflation back to the 2% target.
Williams acknowledged that inflation is still very high, but predicted that it would follow a moderate course in the second half of 2024. He also noted that wage increases are still too high compared to the 2% inflation target.
On a positive note, Williams said the economy is moving towards better balance and inflation expectations data is stable. Williams expects the economy to grow 2%-2.5% this year and unemployment to be 4% by the end of the year. It also predicts inflation will be 2.5% this year and approach 2% next year.
Williams stated that he was satisfied with the current state of monetary policy and stated that it was clear that the FED was working as he wanted. He said interest rates will have to come down at some point, but he doesn't feel any urgency to act on monetary policy right now.
He noted that inflation does not have to be exactly 2% for the Fed to lower interest rates. Looking ahead, Williams predicts inflation will reach 2% by early 2026. He also stated that interest rate hikes are not part of the baseline forecast.
*This is not investment advice.