New York: New York Federal Reserve President John Williams said on Tuesday the U.S. central bank is on track for more interest rate cuts if inflation pressures moderate as he expects, but he did not address the impact of the Iran conflict on the economy.Yor
"Monetary policy is currently well positioned to support the stabilization of the labor market and return inflation to our 2% goal," Williams said in the text of a speech to be delivered to a conference hosted by America's Credit Unions in Washington. Williams said, "if inflation follows the path I expect, further reductions in the federal funds rate will eventually be warranted to prevent monetary policy from inadvertently becoming more restrictive."
He spoke amid volatility on global markets tied to the U.S. and Israeli military attacks on Iran. The war so far has most notably driven up energy prices, which could in turn add upward pressure to inflation levels that are already above the Fed's 2% target.
Markets, worried about the outlook for pricing pressure driven by the war, are moving to price out what had been prospects of more Fed rate cuts this year.
Williams did not address the conflict's economic impact in his prepared remarks.
The Fed trimmed its benchmark interest rate by three-quarters of a percentage point to the 3.50%-3.75% range last year, as it sought to provide support to a weakening job market while still keeping enough restraint on the economy to guide inflation back to its target. Officials had been eyeing more cuts this year on expectations that inflation pressures would fade, but the war is now clouding that outlook.
Williams said the U.S. economy is on a solid footing and should grow by 2.5% this year, "supported by stimulus from fiscal policy, favorable financial conditions, and robust investments in artificial intelligence."
He said the job market, which is in a low-hire, low-fire environment, has stabilized and he expects the unemployment rate to edge lower this year and in 2027. Williams said tariffs have been a notable driver of inflation this year, but that influence should wane heading into the middle of this year, allowing overall inflation, as measured by the Personal Consumption Expenditures Price Index to ease to 2.5% this year, settling back to the 2% target in 2027. The PCE was 2.9% in December.
Williams noted that the impact of the U.S. import tariffs is "overwhelmingly" borne within U.S. borders, and not by foreign producers. Recent New York Fed research made that point, which drew heated criticism from the Trump administration.
"Monetary policy is currently well positioned to support the stabilization of the labor market and return inflation to our 2% goal," Williams said in the text of a speech to be delivered to a conference hosted by America's Credit Unions in Washington. Williams said, "if inflation follows the path I expect, further reductions in the federal funds rate will eventually be warranted to prevent monetary policy from inadvertently becoming more restrictive."
He spoke amid volatility on global markets tied to the U.S. and Israeli military attacks on Iran. The war so far has most notably driven up energy prices, which could in turn add upward pressure to inflation levels that are already above the Fed's 2% target.
Markets, worried about the outlook for pricing pressure driven by the war, are moving to price out what had been prospects of more Fed rate cuts this year.
Williams did not address the conflict's economic impact in his prepared remarks.
The Fed trimmed its benchmark interest rate by three-quarters of a percentage point to the 3.50%-3.75% range last year, as it sought to provide support to a weakening job market while still keeping enough restraint on the economy to guide inflation back to its target. Officials had been eyeing more cuts this year on expectations that inflation pressures would fade, but the war is now clouding that outlook.
Williams said the U.S. economy is on a solid footing and should grow by 2.5% this year, "supported by stimulus from fiscal policy, favorable financial conditions, and robust investments in artificial intelligence."
He said the job market, which is in a low-hire, low-fire environment, has stabilized and he expects the unemployment rate to edge lower this year and in 2027. Williams said tariffs have been a notable driver of inflation this year, but that influence should wane heading into the middle of this year, allowing overall inflation, as measured by the Personal Consumption Expenditures Price Index to ease to 2.5% this year, settling back to the 2% target in 2027. The PCE was 2.9% in December.
Williams noted that the impact of the U.S. import tariffs is "overwhelmingly" borne within U.S. borders, and not by foreign producers. Recent New York Fed research made that point, which drew heated criticism from the Trump administration.
