New York Fed President Mentions Possibility of Interest Rate Cut by Year-End

John Williams, President of the New York Federal Reserve Bank (Fed), classified as a hawk (tightening preference), stated that interest rates could be cut by the end of this year.

Jerome Powell, Chair of the U.S. Federal Reserve (Fed) [Image source=Yonhap News]

In an interview with the U.S. online media Axios on the 23rd (local time), President Williams said, "At some point, I think it will be appropriate to withdraw restrictive monetary policy," adding, "(That point) is expected to be by the end of this year."

Regarding what is necessary for a rate cut, he said, "It is important to read the data and find consistent signals that inflation is not simply falling but moving toward the 2% target," adding, "There is no formula or single indicator that will tell us this. It is important to extract signals by looking at all information, including the labor market and other indicators."

President Williams asserted that the Fed's policy of cautiously cutting interest rates and gradually reducing the balance sheet is ongoing. Balance sheet reduction refers to quantitative tightening, where the Fed absorbs market liquidity by selling bonds it holds or by not reinvesting after sales.

Although the Fed was expected to start cutting rates at the Federal Open Market Committee (FOMC) meeting in March this year, the timing was delayed to June or July after last month's Consumer Price Index (CPI) rose 3.1% year-on-year, exceeding market expectations. President Williams said, "My overall view of the economy has not changed based on one month of data," adding, "Inflation is expected to fluctuate month to month. The process may be somewhat uneven."

However, he said, "If there are signs that inflation is not moving toward the 2% target or if monetary policy fails to have the required effect, and the economic outlook changes significantly, I will reconsider."

Additionally, President Williams expressed skepticism about whether improvements in raw materials and labor supply will continue this year. He said, "Last year was remarkable on the supply side," adding, "It would be good if we could have another good year in terms of productivity and labor."