New York FED President John Williams stated in his statement today that he expects interest rates to be reduced gradually over time. However, he refrained from specifying when the FED might start easing monetary policy.
“I expect interest rates to gradually decline over the next few years, reflecting the fact that inflation is back to our 2% target and the economy is on a very strong sustainable path,” Williams said in an interview with Fox Business.
When asked about the possibility of the Fed meeting current market expectations for a rate cut in September, Williams declined to make a prediction about the exact path the policy would take. Emphasizing that the outcome “depends on how the data develops,” Williams said, “I think things are moving in the right direction” for an eventual relaxation.
These comments were Williams' first public comments since last week's Fed policy meeting. During the meeting, policymakers had kept the central bank's benchmark interest rate in the range of 5.25%-5.50%. The Fed also released updated economic projections that cut expected interest rate cuts this year to one, down from three in March. This regulation came after stronger-than-expected inflation data in the first months of 2024.
Williams underlined that the Fed's “number one mission is to make sure we get inflation back to 2%.” He rejected the view that the FED would allow inflation to remain at 3%.
It also contributed to ongoing debate about whether some recently released data overstates strong gains in the job market. Overall, the data “tells me convincingly that we still have a very strong labor market and we're seeing some slowdown in hiring,” Williams said. However, he acknowledged that some parts of the employment data may have been “exaggerated” and added that it would take time to verify this.
In related news, FED President Barkin also made various statements about inflation. He noted that they are lagging behind in inflation progress and that it is difficult to know how much of a signal to get from inflation last year, this quarter or the last few weeks.
On the services side, Barkin still thinks companies are trying to raise prices as much as possible. Barkin pointed out that housing and service inflation is not yet at the desired level. However, he found this month's inflation figures quite encouraging.
*This is not investment advice.