“Money policy is moderately limited,” Williams said in an interview with Yahoo Finance, saying that current interest rate settings would “put downward pressure on inflation.”
Williams cannot predict that the US Central Bank may change the current level of interest rates, but by keeping it “for a while”, officials can look into incoming data and decide what they need to do next.
Speaking separately in an interview with CNBC, Richmond Industry President Thomas Birkin said the timing of any cuts depends on what happens in inflation. He noted that while Trump administration’s tariffs are nervous about pushing prices up, he is also worried that taxation could damage the job market.
“Let me both of you make me nervous,” Birkin said, “There’s a lot of uncertainty right now. I think it’s arguing to wait and see how this works.”
The two central bankers have been heavily at high economic uncertainty as President Donald Trump advances disruptive changes in trade policy, while simultaneously reducing the federal government and complicating efforts to clarify the outlook for the economy. That uncertainty proved to be a critical feature of the Fed’s pricing meeting earlier this month. Policymakers hope to stabilize central bank benchmarks in the 4.25%-4.50% range and cut interest rates later this year.
Risk of a recession
The Fed’s outlook is complicated by the fact that Trump’s tariffs, which could escalate significantly on Wednesday, are almost certain to drive inflation as there are big questions about how long those benefits will last.
At the same time, uncertainty complicates the efforts of companies to plan and invest, and exacerbates consumer attitudes quickly and dramatically.
All of this is growing concern about a recession. On Sunday, Goldman Sachs predictors said it would increase the probability of a recession from 20% to 35%, saying “recent recent deterioration in household and business trust, as well as statements from White House officials, show a greater willingness to tolerate short-term economic weaknesses to pursue their policies.”
The shift in outlook is driving the financial markets to the price of more Fed interest rate cuts, as traders and investors believe central banks must take action to support the economy.
Williams said he had no intention of placing odds on the outlook for a recession that the economy currently exists, but he still said he was “very solid” in a healthy labor market “up to this point.”
Williams also said “we can assure Americans that high inflation rates will not be eradicated as we saw in the 70s and 80s,” and said the current economic situation is not worthy of being called STAGFLATIONARY, an era of weak growth and high inflation.
The New York Fed leader also said he needs to have more information before he can articulate what tariffs will do due to price pressure. He said his forecast was “relatively stable inflation” this year, but added that there is a “upward risk” to price pressure.
Williams also said, as he sees, long-term inflation expectations remain stable and the Fed will make sure it stays that way.
Speaking at the next newsmaker event in Reuters, International Monetary Fund Managing Director Christarina Georgieva supported Williams’ outlook and said the process of slowing inflation will continue despite the slower pace this year.
She also said, “While we look at the expectations of inflation, they’re a little higher, they haven’t dramatically changed the trajectory of discovery between now and 2026.”
.png?rect=0%2C31%2C821%2C431&w=1200&auto=format%2Ccompress&ogImage=true&w=420&resize=420,280&ssl=1 "Adani Green Energy establishes wholly owned subsidiary AGE68L")
