Fed’s Williams Says It’s Appropriate to Cut Rates Over Time
Federal Reserve Bank of New York President John Williams said his forecast is that it will “become appropriate” to cut interest rates “over time,” without clarifying the timing or pace of such moves.
“Looking ahead, if progress on our dual mandate goals continues as in my baseline forecast, I anticipate it will become appropriate to move interest rates toward a more neutral stance over time,” Williams said Thursday in remarks prepared for an event organized by the Economic Club of New York.
Fed officials are widely expected to resume rate cuts at their upcoming Sept. 16-17 policy meeting following a deterioration in monthly hiring figures that’s raised concerns about the labor market. They’ve held rates steady so far this year to assess the impact of President Donald Trump’s tariffs on inflation.
In his speech, Williams said the US central bank is facing a “delicate balancing” when it comes to employment and inflation risks.
“The balancing here has moved some of the concerns around the employment mandate a little higher, and on the margin, on the inflation mandate, a little bit lower,” he added while answering questions afterward.
Beyond the September meeting, the path for rates is less clear. Fed Governor Christopher Waller, a contender to replace Jerome Powell as chair next year, said this week the central bank should deliver a series of rate cuts over the next three to six months.
Most other officials, including Williams, are staying more circumspect.
The New York Fed chief said in his speech that the impact of tariffs on inflation so far has been less than originally feared, though he added that “it’s still early days, and it will take time for them to come to be fully realized.”
“Fortunately, I am not seeing signs of amplification or second-round effects of tariffs on broader inflation trends,” Williams said. “Longer-run inflation expectations have remained stable, while short- and medium-term inflation expectations, after increasing modestly earlier in the year, have returned to their pre-pandemic ranges.”
Williams characterized the labor market as undergoing a “gradual cooling,” consistent with a slowdown on the economy. He also said the central bank’s balance-sheet wind-down is going “very smoothly.”
Source : Bloomberg
