New York Fed's Williams Stresses Flexible Approach to Setting Interest Rates -- Update
November 19 2019 - 12:06PM
Dow Jones News
By Nick Timiraos
WASHINGTON -- Federal Reserve Bank of New York President John
Williams said the central bank isn't committed to any particular
policy path in the months ahead, even though he and his colleagues
are comfortable right now with keeping rates steady after cutting
them three times this year.
"The economy is in a very good place," Mr. Williams said at a
meeting of the Securities Industry and Financial Markets
Association, a brokerage-industry trade group, on Tuesday in
Washington. "I think we have monetary policy in the right place.
The key thing is we're not locked into any specific decision" at
policy meetings in the months ahead.
Mr. Williams is vice chairman of the rate-setting Federal Open
Market Committee. It met at the end of October and cut its
short-term benchmark rate for the third time since July to a range
between 1.50% and 1.75%. Officials have lowered rates to cushion
the economy against the risks of a sharp slowdown from decelerating
global growth and a drop in business investment amplified by the
U.S.-China trade war.
Most of his colleagues, including Fed Chairman Jerome Powell in
congressional testimony last week, have said the Fed can hold
steady for now, indicating the central bank is likely to leave its
policy rate unchanged at the final meeting of the year, on Dec.
10-11.
But Mr. Williams's remarks, during a moderated discussion on
stage and then to reporters afterward, underscored that a
wait-and-see stance doesn't mean the Fed is permanently on hold.
Fed officials have said they would consider cutting rates again if
there was a "material reassessment" of their current outlook for
moderate growth and a strong labor market.
Mr. Williams told reporters that the central bank shouldn't
overreact to individual data points and should instead examine how
the economy is likely to perform over the next year or two. Most
Fed officials think the U.S. economy's long-run growth rate is
around 2%, or slightly below.
"Are these global factors or other things causing the economy to
slow more than expected, and slow below trend growth on an ongoing
basis? That would be an argument for somewhat more accommodation,"
said Mr. Williams. "Similarly, if inflation were to move in the
wrong direction on a sustained basis, then that would be an
argument to consider more accommodation."
Using a measure that excludes volatile food and energy prices,
inflation on a 12-month basis has been running at around 1.7% in
recent months, according to the Fed's preferred gauge. The central
bank's goal is 2%.
Mr. Williams didn't identify any scenarios that would lead the
Fed to raise rates in the near term. "I'm definitely watching more
for some of the downside kind of risks in the outlook now," he
said.
Mr. Williams stressed the importance of the Fed's flexibility
this year. After raising its benchmark four times last year to
guard against undesirable levels of inflation or financial bubbles,
the Fed scrapped plans early this year to keep lifting rates. It
then lowered rates beginning in July.
"We've proved this year that when the economic facts changed, we
change our views on the economy and" interest-rate policy, Mr.
Williams said.
Write to Nick Timiraos at nick.timiraos@wsj.com
(END) Dow Jones Newswires
November 19, 2019 11:51 ET (16:51 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.