Fed’s Williams said outlook uncertain, data will drive rate decisions

By Thomson Reuters Apr 11, 2024 | 7:49 AM

By Michael S. Derby

NEW YORK (Reuters) – Federal Reserve Bank of New York President John Williams said on Thursday that the U.S. central bank has made considerable progress lowering inflation, while noting an uncertain outlook means the Fed must watch incoming data to set rate policy.

Williams did not explicitly weigh in on his outlook for rates, saying instead of the most recent rate-setting meeting that “the economic projections we issued at that time indicate that if the economy proceeds as expected, it will make sense to dial back the policy restraint gradually over time, starting this year.”

But he added, “the outlook ahead is uncertain, and we will need to remain data-dependent,” adding “I will remain focused on the data, the economic outlook, and the risks as we evaluate the appropriate path for monetary policy to best achieve our goals.”

Williams’ comments came from the text of a speech prepared for delivery before the Federal Home Loan Bank of New York 2024 Member Symposium in New York.

In his remarks, Williams said the Fed had made “considerable progress” lowering high levels of inflation, while noting he remains focused on getting price pressures back to 2%.

The New York Fed leader spoke a day after the release of consumer level inflation data for March that was unexpectedly strong, which cast further doubt on the Fed’s current forecast of rate cuts at some point later this year.

The unfavorable price pressure data comes as other reports have also pointed to sturdier inflation over the start of the year, which challenges the Fed’s most recent projections that penciled in three cuts this year.

Williams said he expects inflation pressures to ease to between 2.25% and 2.5% this year before falling back to the target of 2% next year, while warning “there will likely be bumps along the way, as we’ve seen in some recent inflation readings.”

Williams said he expects the economy to grow by 2% this year and for the unemployment rate to rise modestly to 4%, before ebbing again next year.

Williams said he expects some easing in rental inflation and that commercial real estate is an area of concern, noting it will take time to resolve issues in that sector.

Bank reserve levels are still high, he said, and brewing central bank plans to slow the pace of the effort contracting the size of the balance sheet does not mean ending the process.

(Reporting by Michael S. Derby; Editing by Alexander Smith)