New York Federal Reserve President Williams: There is no urgency for further rate cuts, data shows some distortion
New York Federal Reserve President John Williams stated that, given the recent employment and inflation data, the Federal Reserve currently does not have an urgency to further cut interest rates. He pointed out that previous rate cuts have positioned policy favorably, and although the data has been distorted due to the government shutdown, core inflation continues to approach the 2% target, and the labor market adjustment is stable. The market expects a low probability of rate cuts in the first half of next year, with a likelihood of about 50% for a rate cut in June
John Williams, President of the New York Federal Reserve, clearly stated that given the recent employment and inflation data, there is currently no urgency for another rate cut, which further reinforces the market's expectation of a pause in rate cuts in the short term.
In an interview with CNBC on Friday, Williams pointed out that the previous rate cuts have positioned monetary policy favorably. He stated, "At this moment, I personally do not feel an urgency to take further monetary policy action immediately, as the rate cuts already implemented have placed us in a very favorable policy stance."
Previously, the Federal Reserve had cut rates in three consecutive meetings, but there are currently differing views on the economic outlook. After last week's Federal Reserve meeting, officials released forecasts indicating that, based on the median forecast, they expect only a 0.25 percentage point rate cut by 2026. Futures market data shows that investors generally believe the likelihood of the Federal Reserve cutting rates in the meetings in January, March, and April next year is low, while the likelihood of a rate cut in June is roughly 50%.
Data Distorted by Shutdown
Williams noted that the recent employment and inflation data have certain distortions due to data collection issues during the government shutdown. Nevertheless, the data shows that core inflation is still moving towards the Federal Reserve's 2% target, while the labor market continues to show a gradual adjustment.
This week's employment report indicated that the unemployment rate rose last month, and hiring activity was weak. Meanwhile, consumer price data showed that the underlying inflation rate in November was below expectations, with the annual growth rate being the lowest since early 2021.
Williams emphasized that the labor market "has not shown any concerning signs." He stated, "I think some of the data is actually quite encouraging; in terms of the Consumer Price Index (CPI), I believe this represents the continuation of the disinflation process we are seeing."
