Fed’s Williams eyes further cuts as price pressures cool further

By Michael S. Derby

NEW YORK (Reuters) – Federal Reserve Bank of New York President John Williams said on Monday the U.S. central bank is likely to lower its interest rate target further over time as inflation pressures continue to cool.

“Monetary policy remains in restrictive territory to support the sustainable return of inflation to our 2 percent goal,” Williams said in the text of a speech to be delivered before a gathering of the Queens Chamber of Commerce, held in New York.

Looking ahead, “I expect it will be appropriate to continue to move to a more neutral policy setting over time,” Williams said, adding “the path for policy will depend on the data. If we’ve learned anything over the past five years, it’s that the outlook remains highly uncertain.”

Williams offered no firm guidance about the timing of rate cuts and whether he believes the Fed will lower its interest rate target, now set at between 4.5% and 4.75%, at the Federal Open Market Committee meeting this month.

Markets have braced for more rate cuts amid guidance of easier policy from central bank officials, but new uncertainties over President-elect Donald Trump’s policies have clouded that outlook. In a speech Monday, Fed Governor Christopher Waller said “at present I lean toward supporting a cut to the policy rate at our December meeting” depending on how the data come in.

In his remarks, Williams said the economy is in a “good place” and the labor market is “strong.” He sees inflation continuing to ebb to the 2% target over time but warned the process could be uneven.

The official said the economy should grow by 2.5% this year or maybe more, with the unemployment rate between 4% and 4.25% “over coming months.” Williams said inflation should be 2.25% for the year and said the job market was unlikely to be a source of upward price pressures.