According to Financial Associated Press on December 21 (editor Xia Junxiong), on Friday local time (December 20), New York Fed President Williams stated that he expects the Fed to implement more rate cuts, but the cuts will depend on subsequent data as monetary policy continues to suppress economic momentum.
With the Federal Reserve announcing its interest rate decision on Wednesday, the quiet period for central bank officials has also ended. Although the Fed announced a 25 basis point rate cut as the market expected, it lowered its forecast for rate cuts next year to 2 times in the latest dot plot, down from 4 times in September.
Williams stated in a media interview that, although a rate cut was made 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 ease inflationary pressures.
As the president of the New York Fed, Williams also serves as vice chairman of the Federal Open Market Committee (FOMC) and has permanent voting rights like Fed governors, being regarded as the "third person" in the Fed.
Regarding the Fed's next steps in monetary policy, Williams stated that the interest rate path is moving towards a neutral rate, indicating that he still expects several rate cuts in the future.
Williams said, "We need to base our decisions on data, and we have time to really assess the data, evaluate what is happening, and make the best judgment based on data, outlook, and risks to achieve our objectives."
"I believe we are in a good position and well-prepared for the future," he added.
Williams pointed out in his speech that there is considerable uncertainty regarding the outlook for inflation and many other aspects.
Has begun to consider the impact of Trump's policies.
Many economists warn that President-elect Trump’s threats to impose tariffs on foreign goods and expel illegal immigrants could likely create upward inflationary pressures.
Fed Chairman Powell stated at a press conference on Wednesday that some members of the Federal Open Market Committee (FOMC) have begun to conduct preliminary assessments of the potential impacts of Trump's policies. Regarding Trump's tariff plan, Powell said it is still too early to conclude how it will affect inflation.
Williams acknowledged 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 thoughts about fiscal policy, immigration policy, and other policies, as these are significant drivers of the economic outlook. But I must emphasize that there are many uncertainties regarding these impacts."
Just before Williams spoke, the U.S. Bureau of Economic Analysis released the PCE price index for November, which is the Fed's preferred inflation indicator.
Data shows that the U.S. PCE year-on-year increase in November was 2.4%, with a month-on-month increase of 0.1%; core PCE year-on-year increase in November was 2.8%, with a month-on-month increase of 0.1%; all four indicators were below market expectations.
Williams stated that the latest inflation data is "encouraging."