New York Fed President Williams said the Fed is now in a good position to achieve a soft landing for the US economy, hinting at slowing the pace of rate cuts after a sharp 50 basis point cut in September.

Williams stated that the September employment report was 'very good,' confirming that despite more than a year of high interest rates leading to a continued slowdown in inflation, the US economy still remains strong and healthy.

"The current monetary policy stance is very appropriate and is expected to continue to support a strong economy and labor market, while also continuing to push inflation back to 2%," Williams told the Financial Times on Monday.

Employment data help change people's expectations for the world's largest economy, which has been a concern, fearing that the Fed's actions to eradicate the most serious inflation in decades by raising borrowing costs could trigger an economic downturn.

The September non-farm employment report also dispelled market expectations that the Fed would cut rates by another 50 basis points at the November meeting. Prior to this, the Fed decided to initiate its first easing cycle in over four years by cutting rates by 50 basis points to 4.75-5%. Williams, a permanent voting member of the Fed's Federal Open Market Committee (FOMC) and a close ally of Fed Chairman Powell, said that the rate decision in September was 'right' and 'appropriate' in the current situation, as there is evidence that inflation is slowing and some heat in the labor market has subsided.

"As the chairman said, it makes sense to readjust policy to remain restrictive and continue to exert downward pressure on inflation, but the degree of adjustment should be significantly reduced," he said. "I don't want to see the economy weaken. I want to maintain the strength seen in the economy and labor market."

When asked how the Fed should actively continue cutting rates, Williams said that the latest rate forecast 'dot plot' from officials suggests two 25 basis point rate cuts at the remaining two meetings this year, which is a 'very good baseline scenario'.

He said the final decision will depend on the data rather than following a 'pre-set path,' echoing Powell's wording.

A 50 basis point rate cut in September is not a 'guide to our future actions,' Williams added.

Williams stated that his goal is to adjust interest rates to a 'neutral' level, no longer suppressing demand in the long term, although he admits a lack of precision in estimating where rates will eventually end up.

He said if inflation falls faster than expected, 'this will require policy normalization faster.' Conversely, if inflation stagnates, 'this will require a slower rate cut.'

Williams expects the Personal Consumption Expenditures Price Index (PCE) to approach the Fed's 2% target next year, but he remains vigilant against shocks from regions like the Middle East.

"This is definitely a risk on my list of global economic and recent inflation risks," he said regarding the recent rise in oil prices.

Williams is unconcerned about inflation related to housing, as this type of inflation is more stubborn than expected, keeping the overall monthly indicators at higher levels. However, 'forward-looking indicators are gradually approaching our target,' he said.

Editor/Lambor