MNI BRIEF: Williams Backs 'Modestly Restrictive' Fed Stance

The Federal Reserve has time to assesses the effects of tariff policies and other changes on the economy while keeping interest rates at current levels, New York Fed President John Williams said Tuesday. 

"Maintaining this modestly restrictive stance of monetary policy is entirely appropriate to achieve our maximum employment and price stability goals. It allows for time to closely analyze incoming data, assess the evolving outlook, and evaluate the balance of risks to achieving our dual mandate goals," Williams said in prepared remarks. 

Williams said the Fed has made progress on bringing inflation down but underlying measures remain above the 2% target and there are indications that tariffs are boosting the prices of certain goods. He said he expects inflation to increase to 3% this year before gradually falling to goal over the next two years. 

He cited a New York Fed survey of the Second District which finds three quarters of respondents passed along at least some of their higher costs to consumers. "Almost a third of manufacturers and nearly half of service firms reported fully passing along all tariff-related cost increases." (See MNI INTERVIEW: Tariff Uncertainty To Drive Factory Outlook-ISM)

Williams described consumer spending as resilient and the labor market as solid, saying growth will fade to 1% this year and the unemployment rate rise to 4.5%.