Federal Reserve Bank of New York President John Williams, a permanent voting member of the Federal Open Market Committee (FOMC), has signaled at least one more rate cut by year-end in order to support the labor market.
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“My own view is that, yes, we would have lower rates this year, but we’ll have to see exactly what that means,” Williams said in an interview with The New York Times.
Fed Weighs Inflation and Labor Market Pressures
At the same time, Williams believes that inflation is still an issue and expects it to move up to the 3% range alongside a slight uptick in unemployment. In August, the Consumer Price Index (CPI) rose by 2.9% year-over-year, the highest rate since February. September’s CPI report has been delayed by the government shutdown, leaving the Fed in the dark on key inflation data.
“The risk that inflation got well above 2 percent and we didn’t bring it back down would be very damaging to the economy and to our credibility,” said Williams.
The Fed faces a challenging scenario, as a higher federal funds rate combats inflation but also weakens the labor market.
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