Fed’s Williams expects rates to fall as inflation pressures ease

Federal Reserve Bank of New York President John Williams said Tuesday that interest rates will lower gradually over time, but declined to say when the central bank may begin the process of easing policy. monetary.

“I expect interest rates to gradually decline over the next two years, reflecting the fact that inflation is returning to our 2% target and the economy is moving on a very strong and sustainable path,” Williams said in an interview. on the television channel FoxBusiness.

Asked whether the Fed will meet current market expectations for a rate cut in September, Williams said, “I’m not going to make a prediction” about the exact path of policy.

What happens “depends on how the data evolves,” he said, adding that “I think things are going in the right direction” for eventual flexibility.

Williams’ comments were his first publicly issued since last week’s Fed policy meeting, when policymakers kept the central bank’s benchmark rate in the 5.25%-5.5% range.

The Fed also released updated economic projections that reduced the rate cuts expected this year to one from the three seen in March in the wake of better-than-expected inflation data in the first months of 2024.

Williams said that for the Fed “the number one task is to make sure that inflation returns to 2%” and rejected the idea that the institution will tolerate inflation remaining around the 3% level.

He also weighed in on the debate that some recent data could be overstating what have been solid gains in the labor market.

Overall, the data “convincingly tells me that we still have a very strong labor market and we are seeing some slowdown in hiring,” Williams said. However, he acknowledged that some parts of the employment data may be “exaggerated,” something that will take time to confirm.

[Con información de Reuters]

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