New York Fed President Williams Emphasizes Maintaining a Modestly Restrictive Monetary Policy Stance Despite Mixed Economic Signals

New York Fed President John Williams emphasized the importance of maintaining a modestly restrictive monetary policy stance during a speech at the NY CREATES Albany NanoTech Complex in Albany, New York, on Tuesday. Williams noted that keeping the federal funds rate at its current level of 4.25% to 4.5% allows policymakers to analyze incoming data and evaluate risks in the current economic climate.

Williams' position contrasts with some other Fed governors who have suggested a potential rate cut in July might be appropriate. However, his comments align with Fed Chairman Jerome Powell, who signaled patience on rate cuts amid economic stability.

"Given the continued uncertainty, the solid labor market, and inflation still above our 2 percent goal, the FOMC decided at its meeting last week to leave the target range for the federal funds rate unchanged," Williams said in his speech.

The New York Fed president pointed to mixed economic signals, with survey data showing pessimism and uncertainty about the economic outlook, while hard economic data indicates the U.S. economy "remains in a good place." In his outlook, Williams expects real GDP growth to slow to just over 1% this year, with unemployment rising to around 4.5% by year-end. He projects inflation will increase to around 3% in 2025 due to tariffs, before gradually declining to 2% over the following two years.

Williams also highlighted findings from a recent survey showing that about three-quarters of manufacturers and service firms in New York and New Jersey have passed along at least some tariff-related cost increases to customers.

In terms of monetary policy, Williams noted that the Fed continues to reduce its holdings of Treasury securities and agency debt and mortgage-backed securities. He added that "despite market volatility related to trade policy and other developments, that process continues to go very smoothly."

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