NY Fed's Williams Pushes Back On Rate Cut Talk And Market Pricing

NY Fed Pres Williams interviewed on CNBC, replying to on "what changed" between the November and December meetings to lead to such a dovish set of communications at the latter - he pushed back on rate cut speculation coming out of Wednesday's Powell press conference, saying:

• We aren't really talking about rate cuts right now, we're focused on the question in front of us: whether we've gotten policy to a sufficiently restrictive stance. I think we'll be continuing to think about that for some time. Clearly we put in projections for what may happen over the next 3 years, but the discussion at the FOMC right now is, do we have monetary policy right now in the right place.
• Answering CNBC's question about why Powell said the FOMC had discussed rate cuts at this meeting, Williams says that it wasn't a discussion about what the FOMC is going to do, it was about the forecasts that FOMC members put in their SEP submissions.
• Williams says re market reaction to the FOMC decision: The market reacts to all kinds of data, news events... that reflects the uncertainty... in terms of what the market's saying - the FOMC is going to do this many rate cuts this year - I would just point them to the median projections, over the next three years gradually policy restraint that we've put in place will be dialled back. That's the view of the Committee. The market in a way is reacting more strongly than what we are showing in terms of projections
• Re a rate cut as soon as March, Williams says: It's premature to be asking that question. It is premature to really be thinking about what we will be doing well into the future.
• Re potential tightening: We will do whatever we need to in order to achieve our goals.
• On whether QT will end next year, says: Balance sheet runoff working as intended. Clearly we're now down to about $800B in ON RRP and we're watching developments closely. The level of reserves is around $3.5T, still clearly abundant. Right now it's going to plan.
• On looser financial conditions recently, Williams says: 10Y yields rose a lot between Jul and Oct; they've loosened not just because of recent events but due to data flow. We need to read through that a bit and look for the persistent components of financial conditions. From my point of view, financial conditions have tightened in the big picture, slowing growth and inflation. We've got policy in a good place, need to be confident it will get inflation to 2%.