MNI POLICY: Fed's Williams Calls for Patient, Careful Approach

By Jean Yung

     WASHINGTON (MNI) - Federal Reserve Bank of New York President John Williams

on Friday called for a careful, patient stance on monetary policy as the outlook

for growth softens this year, but warned that rates may still rise if the

economy accelerates well above its speed limit. 

     Strong global growth, fiscal stimulus, and quite accommodative financial

conditions boosted growth last year and necessitated gradually rising interest

rates. Now that these tailwinds have faded and investors are increasingly geared

for a weaker outlook, "the approach we need is one of prudence, patience, and

good judgment," Williams said. 

     Rates are "closer to normal levels" and inflation is "tame" and expected to

stick to a 2% pace this year. He also projects GDP to grow between 2 and 2.5%

this year, "a step down from 2018, but still consistent with a healthy, growing

economy." 

     "If growth continues to come in well above sustainable levels, somewhat

higher interest rates may well be called for at some point. However, if

conditions turn out to be less robust, then I will adjust my policy views

accordingly," he said. 

     Williams also repeated a pledge to reassess the Fed's balance sheet

normalization program should the outlook "deteriorate in a material way," or if

the process proves to be less predictable or more disruptive. 

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

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