By Matt Grossman
New York Federal Reserve President John Williams said Friday that holding interest rates steady this week was the right move given "mixed signals" about the economy's direction.
Speaking at a conference in the Bahamas, Williams said the economic-policy environment has grown more uncertain and acknowledged that the path of disinflation has been bumpy. With inflation still above the Fed's 2% target, the Fed made the correct choice by holding rates at a level that helps cool the economy, Williams said.
"The current modestly restrictive stance of monetary policy is entirely appropriate given the solid labor market and inflation still somewhat above our 2 percent goal," Williams said, according to a published text of his remarks. "It also positions us well to adjust to changing circumstances that affect the achievement of our dual mandate goals."
Williams joined all 11 of his colleagues who vote on interest rates in supporting the hold on Wednesday. Fed governor Christopher Waller dissented separately from the central bank's decision to slow the rate at which it will reduce its balance sheet.
After significant progress in late 2022 and 2023, the Fed has confronted a stubborn challenge getting price increases all the way back on target. The latest leg of that challenge has come from the Trump administration's trade policy, which has sent inflation expectations higher.
Williams acknowledged the renewed concern from consumers and businesses, but said it's reassuring that longer-run inflation expectations haven't increased.
In general, "households expect an inflation shock will gradually decay over the ensuing years," Williams said, citing evidence from macroeconomic research. "Importantly, there are no signs of inflation expectations becoming unmoored relative to the pre-pandemic period," he added.
Write to Matt Grossman at matt.grossman@wsj.com
(END) Dow Jones Newswires
March 21, 2025 09:38 ET (13:38 GMT)
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