The latest New York Fed President John Williams took a different view, saying the Federal Reserve still has room to cut interest rates in the near term without jeopardizing progress toward its 2% inflation target. He acknowledged that inflation progress has stalled temporarily but stressed the importance of steadily returning inflation to target.
Williams expects price pressures to ease as the impact of tariffs passes through the economy without producing prolonged inflation. The labor market is also showing signs of easing, with the unemployment rate rising to 4.4% in September, a level he described as in line with pre-pandemic levels.
He stressed the need to balance the inflation target with maximum employment. He also described the current monetary policy picture as somewhat tight. Accordingly, he sees room for rate adjustments that bring policy closer to neutral.
The New York Fed, which has permanent voting rights on the FOMC, plays a key role in monetary policy discussions. Williams' remarks come as policymakers debate whether the Fed should continue rate cuts at its December meeting.
Some Fed officials are reluctant to make additional cuts until there is strong evidence that inflation will move toward the 2% target.
