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Williams Seeing No Urgency For Rate Cuts Helps Extend Hawkish Data Reaction

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  • NY Fed’s Williams (voter) talking on no urgency to cut rates (with rate cuts eventually at some point), helps extend an increase in Fed implied rates after earlier stronger than expected US data.
  • Cumulative cuts from 5.33% effective: 1bp May, 4bp Jun, 11bp Jul, 22bp Sep, 28bp Nov and 41bp Dec.
  • Q: Are we in a higher for longer, we really mean it this time, stage where cuts are pushed out to next year?
  • Williams: We always say we’re data dependent and the data have really been pretty good on the economy […] Monetary policy is in a good place, interest rates are in a place that’s moving us gradually to our goals. I definitely don’t feel urgency to cut rates. Mon pol is doing exactly what we’d like to see. Over time the data will inform our decisions. Eventually, my expectation is that as inflation gets all the way to 2% on a sustained basis and the economy is in good balance, that interest rates will need to be lower at some point.
  • Q: Is there a possibility the Fed could even raise rates?
  • Williams: It’s not my baseline. My expectation right now is that interest rates are in a good place and eventually at some point we would want to lower rates as the economy really gets to the 2% inflation that we’re headed towards. Of course, you never know what can happen. If the data are telling us that we need higher interest rates to achieve our goals then we would obviously want to do that. It’s not my base case but one of the things we’ve learned over the past few years is that it’s hard to predict the future and we need to adjust our policy stance as appropriate to achieve our goals.
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  • NY Fed’s Williams (voter) talking on no urgency to cut rates (with rate cuts eventually at some point), helps extend an increase in Fed implied rates after earlier stronger than expected US data.
  • Cumulative cuts from 5.33% effective: 1bp May, 4bp Jun, 11bp Jul, 22bp Sep, 28bp Nov and 41bp Dec.
  • Q: Are we in a higher for longer, we really mean it this time, stage where cuts are pushed out to next year?
  • Williams: We always say we’re data dependent and the data have really been pretty good on the economy […] Monetary policy is in a good place, interest rates are in a place that’s moving us gradually to our goals. I definitely don’t feel urgency to cut rates. Mon pol is doing exactly what we’d like to see. Over time the data will inform our decisions. Eventually, my expectation is that as inflation gets all the way to 2% on a sustained basis and the economy is in good balance, that interest rates will need to be lower at some point.
  • Q: Is there a possibility the Fed could even raise rates?
  • Williams: It’s not my baseline. My expectation right now is that interest rates are in a good place and eventually at some point we would want to lower rates as the economy really gets to the 2% inflation that we’re headed towards. Of course, you never know what can happen. If the data are telling us that we need higher interest rates to achieve our goals then we would obviously want to do that. It’s not my base case but one of the things we’ve learned over the past few years is that it’s hard to predict the future and we need to adjust our policy stance as appropriate to achieve our goals.