Fed Official Sees Positive Economic Outlook

A senior Federal Reserve official expressed optimism that the central bank is now "well positioned" for a soft landing for the U.S. economy. He hinted at a more gradual pace of rate cuts following September's significant half-point reduction.

John Williams' Comments

John Williams, president of the New York Fed, noted that the "very good" September jobs report indicates continued strength in the U.S. economy, even as inflation has eased after over a year of high rates.

> "The current stance of monetary policy is really well positioned to hopefully maintain the strength in the economy and the labor market while continuing to bring inflation back to 2%," Williams told the Financial Times on Monday.

The latest job data has reduced recession concerns that emerged when the Fed raised borrowing costs to tackle rising inflation. It has also tempered expectations for another half-point cut in November following September’s reduction to the 4.75-5% range.

Williams, a voting member of the Federal Open Market Committee (FOMC) and close ally of Fed Chair Jerome Powell, defended the September rate cut, calling it “right in September” and “right today” due to easing inflation and a cooling labor market.

> “It made sense, as the chair said, to recalibrate policy to a still restrictive level that puts downward pressure on inflation but significantly less so,” Williams explained. “I don’t want to see the economy weaken. I want to maintain the strength in the economy and labor market.”

Outlook for Future Rate Cuts

When discussing future rate cuts, Williams referred to the Fed's "dot plot," which indicates two quarter-point cuts in upcoming meetings as a “very good base case.” He emphasized future decisions would be data-dependent rather than predetermined.

He reiterated the need to adjust rates to a "neutral" setting that does not restrain demand, though he admitted that accurate predictions about interest rates' final destination are difficult.

Should inflation decline rapidly, Williams noted that faster policy normalization may be warranted. Conversely, if inflation stalls, rate cuts would slow accordingly.