Fed's Williams Anticipates Further Rate Cuts Due to Data and Policy Impact
Investing.com -- New York Federal Reserve Bank President John Williams expressed his expectation for further interest rate cuts in an interview with CNBC on Friday. However, he emphasized that these decisions will largely depend on future data and the current policy that constrains the economy's momentum.
According to Williams, the core trajectory is moving towards neutral interest rates. He highlighted the importance of being data-driven and taking the time to evaluate data, outlooks, and risks. He added that the central bank is in a good position for the upcoming period.
His comments came after the Federal Open Market Committee meeting that occurred earlier in the week. Officials lowered the overnight target rate by a quarter point to a range of 4.25% to 4.5%, aligning with market expectations. Additionally, the Fed reduced its forecasts for how much it will lower rates next year.
Williams also disclosed that he has begun to take into account the proposed policies of elected President Donald Trump in his economic projections. He believes that fiscal policy, immigration, and other policies are key factors shaping the economic outlook. However, he noted the presence of significant uncertainty.
Fed Chairman Jerome Powell mentioned on Wednesday that some officials have begun to factor potential changes in fiscal policy into their forecasts. Earlier in the week, the Fed had cut the benchmark policy rate by a quarter point to a range of 4.25% to 4.5%, marking the third consecutive rate cut; however, Powell indicated that the pace of cuts is likely to slow.
According to the median projection released on Wednesday, policymakers anticipate two rate decreases in 2025. This contradicts their earlier September forecast of four cuts and indicates adjustments to their expectations regarding where inflation will stand at the end of 2025.
Williams spoke following new data showing that the Fed's preferred inflation measures have risen less than economists expected. Prices, excluding food and energy, rose by 0.1% in November, the smallest monthly increase since May. He described the latest inflation data as encouraging and stated that the central bank's policy is well-positioned yet somewhat restrictive.