Fed's Williams: More rate cuts likely needed 'over time'

Federal Reserve Bank of New York President John Williams said on Monday that the Fed officials will likely need to cut the interest rates further to move policy to a neutral stance now that risks to inflation and employment have become more balanced, per Bloomberg.  

Key quotes

One could argue a case for skipping a rate cut in December, will be watching data closely to decide.

Policy is restrictive enough that a Dec cut still allows ample scope to slow pace of cuts later if needed.

Forecasts show inflation on the path to 2% in medium term.

Money policy remains 'significantly restrictive'.

Still 'a ways to go' in reducing rate to neutral.

The speed and timing of cuts to be determined by economic conditions.

When I look at a broader range of labor market data, it tells a fairly consistent story over the past year about moderating demand relative to supply.

Recent data on inflation indicate that progress may be stalling.

If policymakers' estimates of the target range at the end of next year are close to correct, then the Committee will most likely be skipping rate cuts multiple times on the way to that destination.

Expects more rate cuts to happen over time.

Monetary policy remains in a restrictive stance.

What the Fed does with policy depends on incoming data.

Outlook for economy and policy remains 'highly uncertain.'

Expects US GDP at 2.5% this year, might be higher.

Sees unemployment rate between 4%-4.25% over coming months.

Expects US inflation around 2.25% for 2024.

Further progress on inflation may be uneven.

The US economy is in good place, labor market is solid, in balance.

Expects inflation to continue to gradually ebb to 2%.

Job market unlikely to be a source of higher inflation.

Labor market is softer but still pretty solid.

Will need to bring interest rates down over time.

Unclear where neutral rate is right now

Businesses are finding less ability to push through price increases

Direction is toward lower rates over time.

Appropriate for policy to be somewhat restrictive given inflation.

Critical to get inflation back to 2%.

Not seeing any signs of a US recession. 

Market reaction 

The US Dollar Index (DXY) is trading 0.01% lower on the day at 106.40, as of writing.