MNI POLICY: Fed's Williams: Monetary Policy 'In Good Place'

By Jean Yung

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

said Thursday that monetary policy is in a good place and only a material change

would prompt a change in rates. 

     The three rate cuts this year were meant to provide insurance against

downside risks emanating from slowing investment and growth due to trade

disputes and geopolitical tensions, "and that's what they've done," he said. 

     "The economy is in a good place, and monetary policy is as well," he said

in remarks prepared for a San Francisco Fed conference. "Data dependency remains

our motto, and if there were a material change to this outlook, we would adjust

monetary policy in support of our goals of maximum employment and price

stability." 

     --GLOBAL CHALLENGES

     Shifting demographics and sluggish productivity growth mean that the

neutral interest rate has fallen around the world, and that translates into

slower growth, lower inflation and low nominal rates, Williams said. 

     "Inflation in the United States is below target and has been for some

time," he said. Slower global growth is also playing out in the U.S. data, with

manufacturing, exports and business investment stalling or even declining, he

said. 

     Meanwhile, trade uncertainty and civil unrest in many corners of the world

are putting businesses in a wait-and-see mode. With the world more

interconnected, "If one economy starts to struggle, the spillover effects onto

others can take hold rapidly," he warned. 

     Williams said he still expects U.S. GDP to grow around 2% this year with

labor markets strong and inflation moving back toward 2%. 

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

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