Fed's Williams sees room for "near term" rate cuts

Investing.com -- Federal Reserve Bank of New York President John Williams said on Friday that the U.S. central bank can still cut interest rates "in the near term" without endangering its inflation goal.

Speaking at a Central Bank of Chile event, Williams acknowledged that progress on inflation has "temporarily stalled" and emphasized it was "imperative to restore inflation to our 2% longer-run goal on a sustained basis." He estimates current inflation is around 2.75%.

Despite the pause in inflation progress, Williams expressed confidence that price pressures would ease as tariff impacts work through the economy without creating persistent inflation. He also pointed to signs of softening in the labor market, noting September’s unemployment rate rose to 4.4%, comparable to pre-pandemic levels "when the labor market was not overheated."

Williams described current monetary policy as "modestly restrictive" and said he sees "room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral." This approach would maintain balance between the Fed’s dual goals of price stability and maximum employment.

His comments come amid ongoing debate among Fed officials about whether to cut rates at the upcoming December 9-10 meeting. Some policymakers have opposed further rate cuts until there is clear evidence inflation will drop to the 2% target.

As president of the New York Fed, Williams holds a permanent voting position on the rate-setting Federal Open Market Committee, giving his views significant weight in monetary policy decisions.

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