New York Federal Reserve President John Williams says it is still too early to be talking about rate cuts.
“We aren’t really talking about rate cuts right now,” Williams told CNBC in an interview on Friday. “We’re very focused on the question in front of us, which as chair Powell said … is, have we gotten monetary policy to sufficiently restrictive stance in order to ensure the inflation comes back down to 2%? That’s the question in front of us.”
William’s comments follow the Fed’s decision Wednesday to hold its benchmark interest rate unchanged between the 5.25%-5.50% range. Wednesday also saw the release of an updated Fed Dot Plot, or Summary of Economic Projection, which shows that participants forecast three rate cuts or 75 basis points of cuts by the end of 2024, as reported by The Dallas Express.
Despite economic data suggesting inflation is trending toward the Fed’s 2% target, monetary policymakers have not taken the additional rate increases off the table. Williams also shares this sentiment and says higher rates can’t be ruled out.
“One thing we’ve learned, even over the past year, is that the data can move in surprising ways,” Williams said. “We need to be ready to move further if inflation, the progress of inflation were to stall or reverse.”
If the participants follow through on their plans for the rate cuts in 2024, it would lower the Fed’s overnight benchmark rate from its current range of 5.25%-5.50% to a range of 4.50%-4.75% by the end of next year.
However, if market conditions worsen in 2024 and inflation rebounds, Fed’s chairman Jerome Powell says additional policy firming will be assessed to avoid a recession.
“Inflation is still too high, ongoing progress in bringing it down is not assured, and the path forward is uncertain,” said Powell in his prepared remarks. “As we look ahead to next year, I want to assure the American people that we are fully committed to returning inflation to our 2% goal.”
While the median forecast is for a 25-basis-point decrease in March, Williams says it’s premature to be thinking about rate cuts.
