Fed’s Williams Indicates It May Be Appropriate to Cut Rates ‘Over Time’, Reports FT By Reuters

Federal Reserve Bank of New York President John Williams stated that it may be appropriate for the central bank to reduce interest rates gradually in the future, following a substantial half-percentage-point cut in September. His comments were highlighted in an interview published by a major financial news source.

Recently, Federal Reserve Chair Jerome Powell suggested that the bank might maintain a strategy of quarter-percentage-point reductions and indicated there’s no rush to act, as recent data has bolstered confidence in economic growth and consumer spending.

Williams, who has a permanent vote on the rate-setting Federal Open Market Committee, supported Powell’s assessment, mentioning that he does not view the September cut as a template for future actions. He emphasized his expectation for interest rates to be lowered over time.

According to Williams, the current monetary policy is well-suited for the economic outlook. He noted that the Summary of Economic Projections reflects a positive base case where the economy continues to grow and inflation returns to the 2% target.

On Friday, official data revealed a surprisingly strong job market, challenging previous concerns about a potential weakening in the labor sector.

The recent payroll report has led to adjustments in expectations for near-term Federal Reserve rate cuts. Traders are now estimating an 87% likelihood of a quarter-point cut in the upcoming month, while the possibility of a more significant half-point reduction has been ruled out.