NY's Williams Says Whether To Hike Further "An Open Question"

A NY Times interview with NY Fed President Williams (conducted Aug 2) published this morning leaned characteristically dovish. While there were few surprises vs what we previously knew about Williams' monetary policy views, he seems more skeptical than some of his colleagues about the need for further hikes (eg Gov Bowman this weekend saying "additional rate increases will likely be needed") though is open-minded about September's decision, while he clearly has cuts in 2024 as his base case in line with the June SEP Dot median.

• Says inflation data are moving in the right direction, and "have been coming in as I had expected - and also hoped", but the only way to get back to 2% sustainably is to bring supply and demand closer into balance. If additional rate hikes are required to achieve that balance - "I think that’s an open question, honestly" as policy is "definitely restrictive, but we have to watch the data".
• On whether one or more hikes is needed in this cycle: "I think — it’s not about having to tighten monetary policy a lot. To me, the debate is really about: Do we need to do another rate increase? Or not? I think we’re pretty close to what a peak rate would be, and the question will really be — once we have a good understanding of that, how long will we need to keep policy in a restrictive stance, and what does that mean."
• On skipping a hike in September:" I personally don’t have any preference of what we need to do at a future meeting."
• On potential for rate cuts next year, Williams echoes what Powell has said about potential to bring them down as inflation falls, which would effectively keep real rates constant: "Assuming inflation continues to come down... if we don’t cut interest rates at some point next year then real interest rates will go up, and up, and up. And that won’t be consistent with our goals. So I do think that from my perspective, to keep maintaining a restrictive stance may very well involved cutting the federal funds rate next year, or year after, but really it’s about how are we affecting real interest rates — not nominal rates".
• On the possibility of economic growth re-accelerating: "It's a possibility... I guess if that risk were to materialize, it probably would be more that, demand is a lot stronger than I had been expecting, and we probably need more restrictive policy to bring supply and demand back into balance.