CPI Sentiment Insufficient? Fed Williams Comment Divides 'Traders'


The latest consumer inflation data was well received by financial markets, but New York Federal Reserve Bank President John Williams said the news, while positive, was not enough for the US central bank to cut interest rates anytime soon.

Data released on Wednesday showed that US consumer price growth slowed as expected to 3.4% year-on-year in April, while core CPI, which excludes volatile energy and food prices, rose 3.6% year-on-year, the smallest increase year to year since April 2021.

The slower inflation narrative is "a positive development after several months of disappointing data," Williams said in an interview with Reuters on Wednesday, and "the overall trend looks pretty good."

However, he is still not quite convinced that price pressures move steadily towards the Fed's 2% inflation target before reducing short-term borrowing costs.

Monetary policy is "in a good place," Williams said. "I don't see any indication right now that tells me there is a reason to change the stance of monetary policy now. At the same time I do not expect to get the greater confidence we need to see inflation progress towards the 2% goal in the near future.”

Williams also stated that he saw "no need to tighten monetary policy today," broadly ending any speculation that the Fed might need to raise rates further to reduce inflation to desired levels.

Williams had indicated earlier this month that the US central bank would lower its interest rate target at some unspecified time.

The Federal Open Market Committee kept the overnight target at between 5.25% and 5.5% at its last meeting earlier this month.