FED: NY's Williams: Policy "Somewhat" Restrictive Amid Policy Uncertainty

NY Fed President Williams says in an interview post-November PCE data that "I think what we're seeing is encouraging news. It's been a bit of a bumpy kind of journey. I've seen the disinflation process, especially over the past 12 months, but we've seen really sizable movement down in inflation the last couple years. We're still not to our 2% goal. We're getting. We're going to make sure we get there, but definitely seeing good seeing further progress towards that goal." In other words, Williams as usual is on the dovish side of the FOMC spectrum, echoing Powell's overall message at the December press conference, and seeing policy as alternatively "somewhat restrictive" and "pretty restrictive".

• On the rate outlook: "I think the baseline trajectory is moving down towards neutral rates. But we need to be data dependent. And we have, we have time to really assess the data, assess what's happening, and come to the best judgments based on the data, based on the outlook and the risk to achieve our goals. I think we're in a great place, well positioned. We just need to keep doing what we're doing."
• He says that he was one of the FOMC members who incorporated possible Trump administration policies into his December forecasts:
  • "I completely agree with the chair's [Powell's] remarks. There's just a lot of uncertainty. We don't know. I don't know. A lot of lot of analysis is going on, a lot of studying scenarios and possible policy actions that may or may not take place ... We're going to have to learn what policy actions Congress or the administration will choose to do, and then obviously, study those, analyze those, and fold those in. We have already seen some slowing in immigration into the US and labor force growth, I expect that to continue, and we will see about other things, such as fiscal policy or trade policy right now, I feel like we just don't know the answer. I think directionally, you might expect there to be some, some forms of tariffs or something, right? But it really matters exactly what happens, and then we can really do the process of folding in some of that expectation into your forecast. So in my own personal forecast, I have incorporated some thinking about where fiscal policy may be immigration and other policies, because those are important drivers to thinking about the economic outlook, but I would just emphasize, just a lot of uncertainty about what those effects will be."
• On that outlook: "the economy is in a very good place... for next year, I expect growth to slow somewhat to around 2% GDP growth. Expect the unemployment rate to kind of stay about where it is, around four in a quarter percent... think the disinflationary process hopefully will continue. There is a lot of uncertainty now for a number of reasons, including uncertainty around some of the policies that may happen next year. But right now, I think we're in a really good place. I think the economy is a good place. and most importantly for me. My policy is well positioned. I think we've got monetary policy in a somewhat restrictive stance."
• On financial conditions: "longer term rates have been one of the factors tightening financial conditions. But of course, we've seen a big run up in equity prices offset that."
• On policy restrictiveness: "I don't think we're at the long run neutral rate, real interest rate at all. I think we're still in a restrictive stance of policy, given where the fed funds is, where inflation is", noting his long-run r-star estimate of 2.75% (neutral). That said, he notes neutral rates have probably risen since the pandemic due to multiple factors, including productivity.