NY Fed’s Williams Says Current Modestly Restrictive Stance Of Monetary Policy Entirely Appropriate — Retail Agrees With Fed’s Approach

New York Federal Reserve President and CEO John C. Williams said on Friday there is a certain uncertainty in monetary policy and the Fed’s current stance positions it well to adjust to changing circumstances that affect the achievement of the dual mandate goals. 

“The current modestly restrictive stance of monetary policy is entirely appropriate given the solid labor market and inflation still running somewhat above our two percent goal,” Williams said in his remarks at the Macroeconometric Caribbean Conference at Nassau, Bahamas.

Williams also said he expects GDP growth in 2025 to slow from last year’s pace, in part due to a slowdown in labor force growth due to lower immigration rates.

“But it’s hard to know with any precision how the economy will evolve. Uncertainty is high, and there are many scenarios that could play out, depending on fiscal and trade policies and geopolitical and other developments,” he noted.

On Wednesday, the Federal Reserve maintained a status quo policy, keeping its key borrowing rate targeted at a range between 4.25%-4.5%, which aligned with market expectations.

The Fed also revised its inflation and growth expectations. The central bank expects core PCE inflation to hit 2.8% in 2025, compared to a December projection of 2.5%. At the same time, the Fed has lowered its growth estimate to 1.7% from the 2.1% estimated in December.

Williams also noted that although inflation shocks are expected to have persistent effects on inflation, these effects are anticipated to largely dissipate after five years. “Importantly, there are no signs of inflation expectations becoming unmoored relative to the pre-pandemic period,” he said.

Meanwhile, benchmark U.S. indices traded in the red on Friday, paring some of the gains made over the past few sessions.

The SPDR S&P 500 ETF Trust (SPY) traded 0.83% lower, while the Invesco QQQ Trust, Series 1 (QQQ) was down 0.87%.

An ongoing Stocktwits poll revealed that most respondents agree with the Fed’s policy stance of two rate cuts in 2025.

One user opined the central bank needs to hold rates till 2% inflation is achieved.

Another user argued that by the time the Fed waits to see the impact of tariffs, it might be too late to cut rates.

Investors are now awaiting Trump’s tariff announcements and the upcoming inflation data, which will affect the economy.

Also See: FedEx Stock Attracts Slew Of Price Target Cuts Post Disappointing Outlook Revision, Loop Capital Names It ‘Really Bad Recession Stock’

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