Some dovish stuff from Williams is moving markets
- US economic momentum strong and may be strengthening
- AI investment issues are an increasingly big issue for inflation
- Sees US GDP at 2.25% this year, unemployment at 4% over 2027
- Fed policy can make sure impact of supply shocks not long lasting
- Sees inflation at 3.5% this year, hit 2% target in 2028
- Fed must make sure high inflation does not become entrenched
- Imperative to get inflation back to 2%
- Fed will respond to data when setting monetary policy
- If economy meets expectations, one further hike likely this year
- More data will help the Fed decide what’s next for rate policy
- Sees ‘no need for urgency’ after September rate hike
New York Fed President John Williams says there’s no urgency to move again after the September rate hike, pushing back on the idea that the Fed is on a fast tightening track.
He said one further hike is likely this year if the economy meets expectations, but stressed that the Fed will respond to data and that more information will help determine what comes next.
Williams said US economic momentum is strong and may be strengthening. He forecasts GDP growth of 2.25% this year and sees unemployment at 4% over 2027.
On inflation, he sees it at 3.5% this year and returning to the 2% target in 2028. He said it’s imperative to get inflation back to target and that the Fed must make sure high inflation doesn’t become entrenched. He added that Fed policy can ensure the impact of supply shocks isn’t long-lasting.
He also flagged that AI investment is becoming an increasingly big issue for inflation.
We’ve seen some immediate moves on this as he’s a permanent voter and this is a strong argument against the 35 bps of hikes priced in this year. US 2-year yields are down 2.5 bps to 4.90%.
This article was written by Adam Button at investinglive.com.