New York Fed President John Williams said Friday’s interest rate cuts are not a topic of discussion at the moment for the central bank.
“We’re not really talking about interest rate cuts right now,” he said on CNBC’s “Squawk Box.” “We’re very focused on the question before us, which as Chairman Powell said…is, have we gotten monetary policy into a sufficiently restrictive stance in order to ensure inflation gets back to 2%? That’s the question.” “In front of us.”
The Dow Jones Industrial Average rose to a record high and the 10-year Treasury yield fell below 4.3% this week, as traders took the Federal Reserve’s forecast on Wednesday of three interest rate cuts next year as a signal that the central bank is changing its hawkish stance and will begin cutting… interest rates. Faster than expected rates next year.
Traders are betting that the central bank will cut interest rates more than three times, according to federal funds futures. Futures markets are also indicating that the Federal Reserve may begin cutting interest rates in March.
Williams seems to be curbing some of that enthusiasm a bit.
“I think it’s too early to even think about that,” Williams said when asked about futures prices for a March rate cut.
Williams said the Fed will remain dependent on the data, and if the inflation easing trend reverses, it is ready to tighten policy again.
“It looks like we’re there or close to that in terms of adequate restrictions, but things could change,” Williams said. “One thing we have learned even over the past year is that data can move in surprising ways, and we need to be prepared to move to tighten policy further, if the progress of inflation stalls or reverses.”
The Fed expected its preferred measure of inflation – the core personal consumption expenditures price index – to fall to 2.4% in 2024, decline further to 2.2% by 2025 and finally reach its 2% target in 2026. The measure rose by 3.5%. % in October. On an annual basis.
“We are definitely seeing a slowdown in inflation. Monetary policy is working as intended,” Williams said. “We just have to make sure that…inflation gets back to 2% on a sustainable basis.”
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