Federal Reserve President John Williams said on Tuesday interest rates will come down gradually over time, but he declined to say when the U.S. central bank can kick off its monetary policy easing.
“I expect interest rates to come down gradually over the next couple of years, reflecting the fact that inflation is coming back to our 2% target and the economy is moving in a very strong sustainable path,” Williams said in an interview on the Fox Business television channel.
Asked if the Fed will meet the current market expectations for a rate cut in September, Williams said “I’m not going to make a prediction” about the exact path of policy. What happens “depends on how the data evolves,” he said, adding “I think that things are moving in the right direction” for an eventual easing.
Williams’ comments were his first public remarks since last week’s Fed policy meeting, when policymakers kept the central bank’s benchmark interest rate in the 5.25%-5.50% range. The Fed also released updated economic projections that pared back the expected rate cuts this year to one from the three seen in March in the wake of stronger-than-expected inflation data in the first months of 2024.
Williams said that for the Fed “job number one is to make sure that we get inflation back to 2%,” as he rejected the idea that the central bank would tolerate inflation holding around the 3% level.
He also weighed into the debate that some recent data might be overstating what have been robust job market gains.
Overall, the data “tell me convincingly we still have a very strong labor market and we’re seeing some slowing in hiring,” Williams said. But he acknowledged some parts of the job data may be “overstated,” adding that it will take time to confirm it.
