Federal Reserve Bank of New York President John Williams told the Bronx EDC and BICNY’s 2024 Regional Economic Outlook event held at The Opus Westchester hotel in White Plains on Jan. 10 that the Fed is unlikely to move quickly to cut interest rates while inflation remains above the Fed’s target of 2%.
The New York Federal Reserve Bank is in the Second Federal Reserve District that includes New York state, Northern New Jersey, Southwestern Connecticut, Puerto Rico, and the U.S. Virgin Islands.
“I expect that we will need to maintain a restrictive stance of policy for some time to fully achieve our goals, and it will only be appropriate to dial back the degree of policy restraint when we are confident that inflation is moving toward 2% on a sustained basis,” Williams said.
Williams said that the Fed will not be satisfied with bringing inflation down to 3% or even 2-1/4%. There have been suggestions that the Fed might institute up to three interest rate cuts during 2024, but Williams would not speculate on whether or when that might happen.
“The data indicate that we are clearly moving in the right direction,” Williams said. “However, we still are a ways from our price stability goal.”
Williams serves on the Federal Reserve’s Federal Open Markets Committee (FOMC) and is one of the officials who votes on monetary policy and what to do with interest rates.
“FOMC’s policy actions over the past two years have put in place a restrictive policy stance that is helping achieve balance between demand and supply and restore price stability,” Williams said. “In December, the FOMC kept the target range for the federal funds rate unchanged at 5-1/4 to 5-1/2%. In determining the extent of any additional policy firming that may be appropriate to return inflation to 2% over time, the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
Williams gave his forecast for 2024 and beyond.
“Taking into account the effects of restrictive monetary policy, I expect GDP (Gross Domestic Product) growth to slow to about 1-1/4% this year, and for the unemployment rate to rise to around 4%,” Williams said. “I expect PCE inflation to continue to slow to about 2-1/4% this year, before reaching our 2% longer-run goal next year.”
Williams said that New York City has basically regained the jobs lost during the Covid pandemic.
“Still, the recovery has been uneven,” Williams said. “Even though employment in higher-wage sectors such as finance and business services has rebounded, sectors that tend to provide jobs to lower-wage workers that rely on foot traffic from office workers continue to lag, holding back the city’s recovery.”
Williams explained that when the FOMC meets to discuss the economic situation, where inflation stands, where it is going and what to do with interest rates, the members focus on data and become what he described as “nerdy.” He said that politics does not enter into their discussions and that there are three things to keep in mind about the Fed.
“One, the strong actions that we have taken over the past two years are working as intended,” Williams said. “Two, we have seen meaningful progress on restoring balance to the economy and bringing inflation down. And three, our work is not done. I am committed to achieving our 2% longer-run inflation goal and creating a strong foundation for our economic future.”
The event was presented by RM Friedland and Webster Bank and sponsored by BXEDC, The Catalyst, BICNY, BRI, Cuddy + Feder, LLC & OneKey MLS.
