Fed's Williams welcomes inflation data, not ready to seek rate cuts
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[May 16, 2024] By
Michael S. Derby
NEW YORK (Reuters) - Federal Reserve Bank of New York President John
Williams welcomed the arrival of softer consumer inflation data, he told
Reuters, but said that positive news is not enough to call for the U.S.
central bank to cut interest rates sometime soon.
While it is important not to overemphasize the latest economic news, the
softer tone of April's Consumer Price Index is "kind of a positive
development after a few months where the data were disappointing,"
Williams said in an interview with Reuters on Wednesday.
"The overall trend looks reasonably good" for a gradual slowdown in
inflation pressures, Williams said. But he is still not sufficiently
confident that price pressures are moving sustainably to the Fed's 2%
inflation target before lowering short-term borrowing costs.
Monetary policy is "restrictive" and "is in a good place," Williams
said. "I don't see any indicators now telling me ... there's a reason to
change the stance of monetary policy now, and I don't expect that, I
don't expect to get that greater confidence that we need to see on the
inflation progress towards a 2% goal in the very near term."
"I don't see any need to tighten monetary policy today," Williams said,
pouring water on speculation that the Fed might need to raise rates
further to reduce inflation to desired levels.
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The New York Fed leader, one of the top voices at the central bank who
also serves as vice-chairman of the rate-setting Federal Open Market
Committee, was interviewed in the wake of inflation data indicating a
welcome slowdown, renewing Wall Street hopes the Fed might cut interest
rates this year.
April's headline CPI rose 3.4% from a year earlier, down from 3.5% in
March, while prices excluding food and energy rose 3.6%, the smallest
increase in three years.
BETTER BALANCE
Williams' remarks offered his first extensive take on monetary policy
and the economic outlook since the FOMC met this month and held the
policy rate at 5.25%-to-5.50%, where it has been since July. Policy
makers also announced they would slow the pace of their effort to shrink
the central bank’s large balance sheet.
This year, higher-than-expected inflation readings have complicated the
Fed's outlook for monetary policy. In March, officials penciled in three
rate cuts over the course of 2024, but sticky inflation has prompted
them to back away from firm projections of rate cuts. Some officials
have even mused about possible rate increases.
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![](../images/051624PIX/busine99.jpg)
John C. Williams, president and CEO of the Federal Reserve Bank of
New York speaks to the Economic Club of New York in the Manhattan
borough of New York, U.S., March 6, 2019. REUTERS/Lucas Jackson/File
Photo
![](http://archives.lincolndailynews.com/2024/May/16/images/ads/current/graue_lda_BUICKENCORE4176_051324.jpg)
Further complicating the outlook, recent growth and hiring data have
moderated, raising risks of a low-growth, high-inflation economy
that would be thorny for Fed officials to navigate. Meanwhile, Wall
Street bets on rate cuts have been volatile, with traders and
investors now eyeing a first quarter-point cut in September and a
second by the end of the year.
In comments Tuesday, Fed Chair Jerome Powell said, "I expect that
inflation will move back down ... on a monthly basis to levels that
were more like the lower readings that we were having last year."
Powell, too, pushed back on rate-increase prospects, saying "it is
more likely ... we hold the policy rate where it is."
In his remarks, Williams said the economy remains on a solid footing
and is coming into better balance. The labor market remains “tight”
even as it is moving toward a better place primarily through the
elimination of excesses, rather than through pushing up
unemployment.
Williams said unemployment would likely rise to 4% this year from
the current 3.9%. Meanwhile, he said inflation by the Fed's
preferred measure - the personal consumption expenditures price
index - will likely be in the low 2% range by year end, putting it
at around 2.5% for the year. He expects it to hit around 2% next
year and remain there sustainably after that.
To change monetary policy, Williams said the Fed needs to have
confidence inflation will hold at 2%, not for it to hit 2% before
acting to cut rates. “It shouldn't be that we're at that 2% level
because then I think we will have waited too long,” he said.
Williams also said the Fed’s balance sheet, which doubled in size on
bond buying stimulus purchases, is still having some “modest” impact
on bond yields as the central bank works to reduce the size of its
holdings.
(Reporting by Michael S. Derby; Editing by David Gregorio)
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