The latest New York Fed President John Williams has a different view, stating that the Federal Reserve still has room to cut interest rates in the near term without threatening progress toward the 2% inflation target. He acknowledged that inflation progress has temporarily stalled but emphasized the importance of consistently bringing inflation back to the target level.
Williams expects price pressures to ease as the effects of tariffs pass through the economy without causing sustained inflation. The labor market also shows signs of slowing, with the unemployment rate rising to 4.4% in September, a level described as consistent with the pre-pandemic period.
He stressed the need to balance the inflation target and maximum employment. He also described the current monetary policy stance as somewhat tight. Accordingly, he sees room for rate adjustments that would bring policy closer to a neutral level.
The New York Fed, which holds a permanent voting right on the FOMC, plays a key role in monetary policy discussions. Williams’ statement comes as policymakers debate whether the Fed should continue cutting rates at the December meeting.
Some Fed officials are reluctant to make further cuts until there is strong evidence that inflation is moving toward the 2% target.
