Williams from the Federal Reserve stated that the U.S. economy is in good shape, and the job market remains strong. A moderate tightening of MMF provides space to evaluate new data. The reduction of the Federal Reserve's balance sheet is proceeding smoothly. There is a discrepancy between the weak soft data and the more resilient hard data.
Federal Reserve's Williams also expects that this year economic growth in the United States will slow down and the inflation rate will rise, largely due to the impact of trade tariffs. Williams stated, "I expect that uncertainty and tariffs will suppress spending, reduce immigration, and thus slow down labor growth," therefore predicting that economic growth this year will significantly slow to around 1%, and the unemployment rate will rise from the current 4.2% to 4.5% by the end of the year.
He also anticipates that as Trump's tariff policy drives up prices, the inflation rate will rise to 3%, and then gradually slow to the 2% target over two years. Williams did not make any forward-looking comments on interest rate policy. When discussing the FOMC meeting, he said, "Maintaining this moderately restrictive monetary policy stance is fully appropriate for achieving maximum employment and price stability objectives." The current interest rate stance of the Federal Reserve "gives us time to closely analyze newly received data, assess the changing outlook, and evaluate the risk balance of achieving our dual mandate objectives."
