MNI: Fed's Williams Sees More Downside Risks To Growth
MNI (WASHINGTON) - A "continuum of possible scenarios" are possible for the U.S. economy this year, but it is clear that growth is set to slow under the mix of Trump policies seen so far, Federal Reserve Bank of New York President John Williams told reporters Friday.
"We have gotten greater clarity around immigration policy and how that’ll affect economic growth, and we’ve seen actual trade policies implemented in terms of tariffs," he said in a virtual Q&A. (See MNI INTERVIEW: Fed To Focus On Growth Drag From Tariffs-Sahm)
"From my point of view what we see are factors that definitely have lowered somewhat the outlook for growth and maybe a touch higher unemployment, and factors that suggest somewhat higher inflation for this year, and maybe not necessarily as big effects next year."
Tariffs could end up boosting prices just once, but there are other scenarios where the effects are more persistent, he said. In the 2018-19 episode, "inflation effects ended up being relatively modest and short-lived. This time it really depends on the details," he said.
Hard and soft data have been mixed in recent weeks, Williams noted. Spending data was weak in January with a February rebound slightly offsetting that. Trade data is marked by "a lot of special factors" like the spike in gold imports and stockpiling behavior. Survey results and the Fed's Beige Book contacts "reflect some reduction in optimism" in the business community along with uncertainty over trade and other policies, he said.
NO STRONG CONCLUSIONS
"I'm not drawing strong conclusions," he said.
The New York Fed chief also refrained from giving his individual forecasts for growth, unemployment or inflation this year. Nor did he repeat a line present in speeches last year that his baseline policy trajectory is moving down toward neutral rates.
The highly uncertain outlook has made it harder to form a baseline for monetary policy, Williams said.
"I feel like there's a continuum of possible scenarios, partly on trade policy but for a lot of different reasons," he said. "It's hard to say with any confidence my forecast is X versus Y.
"Right now the question is: how do we manage some of these risks and uncertainties? My conclusion is right now we've got policy in a good place, let's collect more data. We're not in a hurry or needing to make any decisions now." (See: MNI FED WATCH: Powell To Sit Tight Amid Heightened Uncertainty )