By Michael S. Derby
HARTFORD, Connecticut (Reuters) – John Williams, the President of the Federal Reserve Bank of New York, shared important insights on Wednesday about the future of monetary policy. He emphasized that the Fed’s actions will closely follow economic data due to a lot of uncertainty, partly from possible changes in government policy.
In a speech at the CBIA Economic Summit, Williams stated that monetary policy is in a good place to balance risks. He noted, “The path for monetary policy will depend on the data.” This indicates a flexible approach, responding to what the economy tells us.
Williams, who is also the vice-chairman of the Federal Open Market Committee, pointed out that the government can make it hard to predict the future of monetary policy. He mentioned, “The economic outlook remains highly uncertain,” particularly concerning fiscal, trade, and regulatory policies.
At the last Fed meeting, policymakers decided to lower the federal funds target rate range to between 4.25% and 4.5%. They adjusted their forecasts, predicting fewer rate cuts for this year and raising inflation estimates based on recent data showing persistent price pressures.
The potential return of Donald Trump as president adds another layer of uncertainty. Many economists worry that his trade and immigration plans could increase inflation, complicating the Fed’s goal of reducing inflation to 2%.
Despite these challenges, Williams believes the economy is stable and recovering well from the pandemic disruptions. He expects the process of reducing inflation to continue but acknowledges it will take time, projecting a return to the 2% target in the coming years.
Williams anticipates that GDP growth will slow to about 2%, while the unemployment rate stays between 4% and 4.25%. He also mentioned that the Fed’s efforts to reduce its balance sheet are going smoothly.
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