By love-89.com In a recent discussion with the Financial Times, John Williams, President of the New York Federal Reserve, clarified that the 50 basis point rate cut in September should not be viewed as a benchmark for future monetary policy. He articulated his belief that the current economic environment is conducive to achieving a soft landing for the U.S. economy and expressed a preference for a gradual approach to any future rate reductions following the September cut.
Williams characterized the September jobs report as “very good,” highlighting the resilience of the U.S. economy, which has withstood more than a year of elevated interest rates, alongside a continued moderation in inflation. “The current stance of monetary policy is indeed in a good place,” he noted, emphasizing that it supports both economic strength and labor market robustness, while also steering inflation towards the 2% target.
The September jobs report tempered market expectations for the Federal Reserve to implement an additional 50 basis point cut after the upcoming November elections. This rate cut marked the Fed’s first reduction in over four years, lowering the rate to a range of 4.75% to 5%.
As a permanent voting member of the Federal Open Market Committee and a close supporter of Fed Chair Jerome Powell, Williams affirmed that the September rate cut was “the right decision then and remains the right one now,” based on evidence of moderating inflation and a cooling labor market.
He remarked, “As the Chair mentioned, adjusting the policy to stay restrictive while applying downward pressure on inflation, albeit at a much lower intensity, is reasonable.” He further emphasized, “I do not want to see a weak economy. I want to maintain the robust performance we observe in the economy and labor market.”
When probed about the Fed’s strategy for future rate cuts, Williams indicated that officials’ latest interest rate projections suggest a potential reduction of 25 basis points in each of the remaining meetings this year. He underscored the importance of making decisions based on data rather than following a preset course, echoing Powell’s perspective.
Williams reiterated that the September rate cut should not dictate future actions, as his aim is to bring interest rates to a “neutral” level that doesn’t stifle demand. Nonetheless, he acknowledged the difficulties in accurately predicting the ultimate target rate.
He pointed out that if inflation falls more quickly than anticipated, “that would prompt a more rapid normalization of policy,” while stagnation in inflation would require a more cautious approach to cuts.
Looking ahead, Williams expects personal consumption expenditures (PCE) inflation to near the Fed’s 2% target next year, though he remains vigilant about potential shocks, particularly those stemming from the Middle East. On the recent uptick in oil prices, he commented, “That’s definitely on my radar as a short-term global economic and inflation risk.”