(Bloomberg) — Federal Reserve Bank of New York President John Williams said there’s a high level of uncertainty over how rapid changes to immigration, trade and fiscal policy will alter the economy, but the current stance of monetary policy is appropriate and positions the US central bank well to respond to changing conditions.
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Speaking with reporters following his prepared remarks Friday, Williams emphasized there are many plausible scenarios for the economy amid such uncertainty. But he noted officials’ median forecasts released earlier this week — which signaled slower growth and upward adjustments to inflation and unemployment forecasts — seemed “reasonable.”
“The current modestly restrictive stance of monetary policy is entirely appropriate given the solid labor market and inflation still running somewhat above our 2% goal,” Williams said in remarks prepared for the Macroeconometric Caribbean Conference in Nassau, Bahamas. “It also positions us well to adjust to changing circumstances that affect the achievement of our dual mandate goals.”
Williams echoed comments earlier this week from Fed Chair Jerome Powell that the labor market and growth have been solid, and that long-run inflation expectations remain anchored. He said he expects growth to moderate this year from 2024 in part due to a slowdown in labor force expansion caused by reduced immigration. He also sees somewhat higher unemployment and inflation in 2025.
When asked about a surge in a closely watched measure of longer-run inflation expectations in recent months, Williams noted the University of Michigan’s gauge is just one piece of information and can be volatile at times. Other measures, he says, have remained stable.
Policymakers left borrowing costs unchanged earlier this week for the second straight time after lowering their benchmark interest rate by a full percentage point late last year. Powell repeated officials are in no hurry to adjust rates, and that monetary policy is well positioned to wait for greater clarity on the effects of President Donald Trump’s policy changes on trade, immigration and regulation.
Tariff Impact
The direct effects of tariffs “might be short lived,” but there are also situations where effects could be more persistent, Williams said.
