MNI BRIEF: Fed Rates Well Positioned For 2026- Williams

The Federal Reserve's interest rate cuts this year leave the central bank in a good position against the backdrop of a cooling labor market and inflation that remains elevated but does not appear to be resurging due to tariffs, New York Fed President John Williams said Monday. 

"My assessment is that in recent months, the downside risks to employment have increased as the labor market has cooled, while the upside risks to inflation have lessened somewhat," Williams said in prepared remarks. 

"Monetary policy is very focused on bringing these risks into balance. To that end, the FOMC has moved the modestly restrictive stance of monetary policy toward neutral. With these actions, monetary policy is well positioned as we head into 2026." (See MNI: Fed Biased To Ease With Focus On Jobs - Ex-Officials)

Williams downplayed the prospect that inflation will rise further from here, but said employment conditions have been weakening steadily. "The data show that the labor market has continued to cool, with labor demand softening more than supply. Job growth has been anemic, and the unemployment rate has moved up steadily in recent months," he said. 

Still, Williams expects growth to accelerate to 2.25% in 2026, much stronger than estimate for this year's pace of around 1.5%."This pickup is in part due to the effects of the government shutdown, but it’s also fueled by tailwinds from fiscal policy, favorable financial conditions, and increased investments in artificial intelligence."