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NY's Williams Open To 50bp Hike, But Runoff Comments Also Of Note

FED

In an event Q&A, NY Fed's Williams was noncommittal to the question of whether he would be open to raising rates by 50bp at the May FOMC meeting.

  • A flashing Red BBG headline of "IF FED NEEDS TO RAISE 50BPS, WE SHOULD DO THAT" is somewhat misleading because it was directly answering a question and he went on to say "if it's appropriate to do 25 - we should do that...I don't see any reason not to do one or the other."
  • Reading between the lines, he probably wouldn't resist a 50bp hike if that's FOMC consensus but he's probably not a major proponent. It's a reasonable guess he is one of the 125bp or 150bp hikers on the 2022 dot plot (ie in the bottom 4). He emphasized today that inflation expectations "have stayed remarkably stable".
  • More interesting were his comments about the balance sheet: he said that many commentators focused solely on Fed funds rate hikes as a means of tightening, and not enough on QT: "both [rate hikes and balance sheet reduction] are affecting financial conditions in very significant ways... back in 2020-2021, asset purchases were a major contributor to providing much stronger financial conditions".
  • This might be reading too much into it, but he may be playing up the tightening impact of QT as a way of justifying a relatively slower Fed funds hiking path.
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In an event Q&A, NY Fed's Williams was noncommittal to the question of whether he would be open to raising rates by 50bp at the May FOMC meeting.

  • A flashing Red BBG headline of "IF FED NEEDS TO RAISE 50BPS, WE SHOULD DO THAT" is somewhat misleading because it was directly answering a question and he went on to say "if it's appropriate to do 25 - we should do that...I don't see any reason not to do one or the other."
  • Reading between the lines, he probably wouldn't resist a 50bp hike if that's FOMC consensus but he's probably not a major proponent. It's a reasonable guess he is one of the 125bp or 150bp hikers on the 2022 dot plot (ie in the bottom 4). He emphasized today that inflation expectations "have stayed remarkably stable".
  • More interesting were his comments about the balance sheet: he said that many commentators focused solely on Fed funds rate hikes as a means of tightening, and not enough on QT: "both [rate hikes and balance sheet reduction] are affecting financial conditions in very significant ways... back in 2020-2021, asset purchases were a major contributor to providing much stronger financial conditions".
  • This might be reading too much into it, but he may be playing up the tightening impact of QT as a way of justifying a relatively slower Fed funds hiking path.