MNI: Fed's Williams Still Sees Work To Be Done On Inflation
MNI (OTTAWA) - The Federal Reserve aims to keep inflation moving toward 2% and the labor market in balance amid shifting fiscal, trade and immigration policies as President-elect Donald Trump and a new Congress take office, New York Fed President John Williams said Wednesday. He made no specific promise to cut interest rates further.
The FOMC's 100 bps of rate cuts last year moved monetary policy stance from one that tightly constrains demand to one that is less restrictive, Williams said.
"Since the Federal Reserve’s mandate is to achieve maximum employment and price stability, we want to see demand in line with supply and keep the risks to achieving our goals in balance. Because that balance has now been achieved, our job is to ensure the risks remain in balance," he said in remarks prepared for an economics conference in Hartford, Conn.
"The economic outlook remains highly uncertain, especially around potential fiscal, trade, immigration, and regulatory policies. Therefore, our decisions on future monetary policy actions will continue to be based on the totality of the data, the evolution of the economic outlook, and the risks to achieving our dual mandate goals." (See: MNI INTERVIEW: Fed Won't Consider Cuts Until March - Benigno)
GRADUAL PROGRESS
Williams expects growth to slow to around 2% this year, in part reflecting the effects of lower immigration, and the unemployment rate to remain around 4% to 4.25%.
Inflation can be expected to decline gradually toward 2% "in the coming years," he said, citing Fed measures of underlying price pressures that have fallen to about 2.25%. Survey- and market-based measures of inflation also show price expectations remain well anchored, he said.
Housing inflation has been stubborn, but rate increases for new leases remain low and are likely to be gradually reflected in official inflation measures, he said. Disinflation "will take time, and the process may well be choppy."
QT is proceeding smoothly, Williams added, without mentioning any plans to end runoffs. Investors expect QT to conclude by June.