On Friday (December 20th) local time, New York Fed President Williams stated that he expects the Fed to implement more interest rate cuts, but with monetary policy still restraining economic momentum, the rate cuts will depend on subsequent data.
As the Federal Reserve announced its interest rate decision on Wednesday, the period of silence among central bank officials also came to an end. Although the Federal Reserve announced a 25 basis point interest rate cut as expected by the market, the latest rate chart has lowered the forecast for next year's rate cuts to 2, compared to 4 in September.
Williams said in a media interview that although interest rates were cut this week, he still believes that the current monetary policy is very restrictive, which means that short-term interest rates will continue to suppress the economy, which should help further alleviate inflationary pressures.
As the Chairman of the New York Federal Reserve, Williams also serves as the Vice Chairman of the Federal Open Market Committee (FOMC) and has permanent voting rights, just like the Federal Reserve Board of Governors, and is regarded as the "third in command" of the Fed.
As for the next direction of the Federal Reserve's monetary policy, Williams said that the interest rate path is moving towards a neutral rate, indicating that he still expects several interest rate cuts in the future.
Williams said, "We need to be based on data, and we have time to truly evaluate the data, assess what is happening, and make the best judgments based on the data, prospects, and risks to achieve our goals
I think we are in a great position and fully prepared for the future, "he added.
Williams pointed out in his speech that there is considerable uncertainty in the current outlook for inflation and many other aspects.
Already considering the impact of Trump's policies
Many economists have warned that US President elect Trump has threatened to impose tariffs on foreign goods and deport a large number of illegal immigrants, policies that are likely to bring upward pressure on inflation.
Federal Reserve Chairman Powell stated at a press conference on Wednesday that some members of the Federal Open Market Committee (FOMC) have begun preliminary assessments of the potential impact of Trump's policies. Powell stated that it is still too early to draw conclusions on how Trump's tariff plan will affect inflation.
Williams acknowledges that the impact of Trump's policy agenda has begun to affect his economic outlook.
He said, "In my personal forecast, I have incorporated some ideas about fiscal policy, immigration policy, and other policies because these are important driving factors that affect the economic outlook. But I must emphasize that there is a lot of uncertainty about these impacts
Just before Williams' speech, the Bureau of Economic Analysis of the US Department of Commerce released the PCE Price Index for November, which is the Federal Reserve's most favored inflation indicator.
Data shows that in November, the year-on-year increase in PCE in the United States was 2.4%, and the month on month increase was 0.1%; The year-on-year increase in core PCE in November was 2.8%, and the month on month increase was 0.1%; All four indicators are lower than market expectations.
Williams said that the latest inflation data is "encouraging".