Source: Wall Street News Author: He Hao
New York Federal Reserve Chairman Williams said that although the latest economic data should not be overemphasized, the CPI cooling in April was a positive development after experiencing disappointing data from previous months. However, there is still insufficient confidence that price pressure will continue to advance towards the Fed's 2% inflation target, so interest rates will not be cut for the time being.
On Thursday, New York Federal Reserve Chairman Williams, said that he welcomed the cooling of US CPI data, but he pointed out that this good news was not enough for the Federal Reserve to cut interest rates quickly.
Williams said that although the latest economic data should not be overemphasized, the cooling of the consumer price index in April was a positive development after experiencing disappointing data from previous months. The overall trend looks pretty good, indicating a gradual reduction in inflationary pressure.
However, Williams is still cautious, and is still not convinced that price pressure will continue to advance towards the Fed's 2% inflation target, so interest rates will not be lowered for the time being.
Williams said that the Federal Reserve's monetary policy is restrictive and is in good shape. “I don't see any indicators right now that there is a reason to change the monetary policy stance, and I don't expect this. I don't expect to get the kind of greater confidence we need about inflation moving towards the 2% target in the short term.”
He also mentioned that the Federal Reserve needs to be confident that inflation will remain at 2%, rather than take action to cut interest rates until it reaches 2%. “We shouldn't have to wait until we reach 2% because then I think we've waited too long.”
Echoing Federal Reserve Chairman Powell's position, Williams threw cold water on speculation that the Federal Reserve might need to raise interest rates further to reduce inflation. He said that there is currently no need to tighten monetary policy.
Williams said in his speech on Thursday that the US economy is still stable and is entering a better balance. The labor market remains tight, and it is progressing to a better state mainly by eliminating excess demand rather than by increasing unemployment.
Williams anticipates that the US unemployment rate may rise to 4% this year from the current 3.9%. At the same time, he said that the Federal Reserve's preferred measure of inflation, the personal consumption expenditure price index, may be in the range of slightly more than 2% by the end of the year, making the annual value about 2.5%. He expects the inflation target to reach around 2% next year and remain stable thereafter.
Williams also pointed out that in the process of reducing the balance sheet, the Federal Reserve had some mild impact on bond yields.
The current macroeconomic outlook for the US is very complicated. Recent economic growth and employment data have slowed down, and inflation has shown obvious twists and turns during the cooling process, increasing the risk that the overall economy will face low growth and high inflation, which will make it difficult for the Federal Reserve to cope. Meanwhile, Wall Street's bets on the Fed's interest rate cut have been unstable. After the US CPI data was released on Wednesday, traders recently predicted that the Fed would cut interest rates by 25 basis points for the first time in September and cut interest rates for the second time before the end of the year.
Other senior Federal Reserve officials
On the same day, several senior Federal Reserve officials also spoke intensively.
US Federal Reserve Chairman Bostic said:
It may be appropriate to cut interest rates until the end of this year; the Federal Reserve must be patient and vigilant.
The latest US CPI data is below the three-month average, and inflation is expected to slowly decline. Housing inflation is currently high, but at this stage it is already at its lowest level since mid-2021. Businesses cannot 100% pass on costs through price factors.
The US economy is slowing down, but there is still momentum.
This year's FOMC voting committee and US Cleveland Federal Reserve Chairman Meister said:
The Federal Reserve should be careful to maintain a high interest rate policy for a longer period of time to evaluate the data. It will take longer for the Federal Reserve to be confident that inflation will fall back towards 2%.
Short-term US inflation expectations have risen. The data means that those risks facing the Federal Reserve's inflation target have risen. It is too early to judge that progress in fighting inflation has stalled. The monthly CPI data showed a welcome decline. The progress of inflation will depend more on the cooling of consumer/employers' demand. This year, the supply-side will not help fight high inflation as much as last year.
Putting fiscal issues on a sustainable path will be important. The Federal Reserve FOMC does not consider political factors when formulating monetary policy.
US Richmond Federal Reserve Chairman Barkin said:
The Federal Reserve's FOMC monetary policy is affecting areas that are sensitive to interest rates. The question is how long will it be necessary to maintain a high interest rate policy in order to keep inflation down. Our policy interest rate is at a restrictive level and will remain so for a while.
Businesses are still willing to raise prices. There is still an inflation problem in the services and housing sector. Further pressure on the demand side is needed to bring inflation back to 2%. Believing that inflation is falling, we are on the right path towards a 2% fall target. There is still some time to wait for inflation to fall back.
Retail data shows that consumer spending is good, but not particularly strong.
The labor market is being normalized, which is good.
It cannot be said that fiscal spending has had no impact on the US economy.
edit/lambor