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

By Jean Yung

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

said Friday he still believes monetary policy is "in the right place" due to the

lack of growing inflationary pressures, even as a number of near term risks have

abated. 

     The U.S. economy saw a surge in growth at the start of the year and the

unemployment rate sank to a near 50-year low. Yet, "recent price data reaffirm

that inflationary pressures remain muted," he said. 

     The recent downward movement in core inflation "appears mostly to reflect

normal volatility in inflation statistics," Williams said, adding that he

prefers to look at the Dallas Fed's trimmed mean inflation measure, which is

running at 2% and hasn't shown any sign of trending up or down. Core PCE

inflation fell to 1.6% in March from 2.0% in December. 

     He will be watching developments closely for signs of a persistent shift

away from the Fed's 2% inflation objective, he said. For now, "the economy

remains on a path of healthy growth, with a very strong labor market and without

the emergence of inflationary pressures. The current setting of policy positions

us well to keep it that way," he said in remarks prepared for the Bronx Bankers

Breakfast in New York. 

     Meanwhile, a number of downside risks from earlier in the year have

diminished. 

     "The strength of recent data on economic activity, the rebound of growth in

China, and the reversal in the tightening of financial markets all imply that

near-term risks to growth have receded somewhat. This has increased my

confidence that the economy remains on track for moderate growth going forward,"

he said. 

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

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