Federal Reserve Bank of New York President John C. Williams said on Monday that while the Fed’s stance on interest rates remains restrictive, the balance of risks is shifting toward potential labor market weakness. He signaled openness to future cuts but stressed that any move must be guided strictly by incoming data.
Inflation Outlook
Williams emphasized that the Fed still has progress to make toward its 2% inflation goal, though underlying price pressures are moderating. He added that monetary policy continues to put downward pressure on inflation, and some upside risks have already eased.
Policy Stance
The New York Fed chief described current policy as restrictive but underscored the importance of maintaining a data-driven approach. He noted that his model puts the real neutral rate at about 0.75%, but stressed that policy should respond to evolving conditions rather than fixed estimates.
Labor Market Risks
Williams highlighted the resilience of the US labor market but warned that it has been gradually softening. He said the Fed must ensure that weakening does not go too far, as risks to the employment side of the mandate are rising.
Tariffs And Broader Factors
On trade policy, Williams said tariffs have had only a modest to moderate effect on inflation. He added that several forces keeping neutral rates low remain in place, further reinforcing the Fed’s cautious approach.
