“Monetary policy is well positioned to balance the risks to our objectives,” Williams, who is also the Fed’s rate-setting vice chairman, said at an economic summit in Hartford, Connecticut, adding that “the path of monetary policy depends on the data.” .
The Fed official pointed out that government policy is the main uncertainty factor for the future development of monetary policy.
The economic outlook remains highly uncertain, particularly around potential fiscal, trade, immigration and regulatory policies
Williams emphasized.
At the Federal Reserve’s most recent interest rate meeting last month, central bankers cut the federal funds rate by a quarter of a percentage point to between 4.25% and 4.5%. As part of the updated forecasts, interest rate cut estimates for the current year have been cut back, and inflation forecasts have been revised upwards due to the stubborn price pressures experienced recently.
Williams also touched on the increase in bond yields, which was particularly noticeable in the case of longer-term government bonds. In his opinion, this change is not related to a comprehensive reassessment of the inflation situation.
“We haven’t seen much movement in inflation compensation,” he noted, adding that the higher yields reflected both the strength of incoming data and market uncertainty around issues of fiscal policy, other policies and global developments.
According to the president of the New York Fed, the US economy is in good shape and has returned to balance after the disruptions caused by the pandemic.
He believes the disinflation process is likely to continue, but added that it may take some time. He expects a return to the 2% inflation target only “in the coming years”.
Williams forecasts that the country’s gross domestic product growth will moderate to 2%, while the unemployment rate will remain between 4% and 4.25%. Regarding the Fed’s balance sheet reduction, he noted that it is progressing smoothly and that reserve levels in the financial system still appear to be quite strong.
Source: Reuters
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