New York Fed President John Williams said that if the recent slowdown in inflation can continue for the next few months, it may be necessary to cut interest rates, but the July meeting two weeks later may not do so.

Williams said, "Recent three months of US inflation data combined with signs of a gradually cooling labor market, brings us closer to the deflationary trend we expect."

"These are all positive signs. I hope to see more data to further enhance confidence and ensure that inflation is sustainably moving toward our 2% target."

As the President of the New York Federal Reserve, Williams also serves as Vice Chairman of the Federal Open Market Committee (FOMC) and has permanent voting rights like the Fed Board of Governors. He is regarded as the third most senior figure in the Bank. In monetary policy, his authority is second only to Chairman Powell. Prior to serving as New York Fed President, Williams served as President of the San Francisco Federal Reserve for nearly seven years.

Williams Source: Federal Reserve website

Williams said that data, including last week's June Consumer Price Index (CPI), showed that "Inflation is generally declining." He also refuted concerns about the "last mile," saying that he did not think it would be much harder to bring inflation back to 2% than to lower it from a high of 7% to the current 2.5%.

Williams said, "It's not really the 'last mile' or some particularly tricky part." He explained that different inflation indicators "are moving in the right direction and are quite consistent." And even if the Fed begins to cut interest rates, the central bank's interest rates will remain at levels that suppress economic activity.

"The restrictive policy stance we are currently adopting is appropriate. I do think that at some point we will have to make a decision, but it is not to abandon the restrictive policy stance but to lower rates to ease the level of policy restrictions."

Recently, analysts such as Goldman Sachs and Moody's believe that the Fed will take action at the policy meeting at the end of this month. Williams responded, "We will learn a lot of information from July to September."

"Encouraging data has been available for several months. I hope to see more of this data in the coming months…if we get this data, we will have greater confidence that inflation is sustainably moving toward our 2% goal."

Prominent financial journalist Nick Timiraos, who is known as the "New Fed News Agency," analyzes that Williams' remarks indicate that even if one or two officials at the July 30-31 meeting strongly advocate a rate cut, the Fed is unlikely to cut interest rates.

Timiraos believes that Williams' remarks also indicate that as long as there is no major economic accident, the central bank may consider cutting interest rates when it meets in mid-September.

Editor/ping