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September 4, 2019

Key Takeaways from President Williams’s Speech on Monetary Policy and the Economic Outlook

On Wednesday, September 4, New York Fed President John Williams spoke at Euromoney’s Real Return Inflation-Linked Products Conference in New York City.

He said:

“The current expansion is the longest on record. The economy continues to grow at a moderate pace, as seen in the latest GDP numbers.”

“Persistently low inflation is a key area of my attention, with the core PCE inflation rate — which strips out volatile food and energy prices — running at 1.6 percent, nearly half a percentage point below our 2 percent longer-run target.”

“With an uncertain outlook, vigilance and flexibility are essential for achieving our dual mandate goals of maximum employment and price stability.”

In his speech, President Williams discussed the U.S. economic outlook, the decision to lower the federal funds rate in July, and the challenges on the horizon. He said that while headline GDP growth is good, “there are more mixed signals coming from different sectors.” He pointed to “signs of slowing business investment” as part of a nuanced picture.

Turning to the adjustment to the federal funds rate made by the Federal Open Market Committee in July, he said: “The combination of muted inflation, slowing global growth, and uncertainties related to trade and other global developments” led to the decision to bring the federal funds rate down by a quarter of a percentage point.

Discussing the economic outlook, President Williams said: “At present, slowing global growth and geopolitical uncertainty pose particular challenges.” He pointed to slowdowns in Germany, the UK, and China, and highlighted that “the European Central Bank and several other central banks have either adjusted, or indicated they will adjust their monetary policy stance to support their economies.”

Looking to the future and the evolution of monetary policy, President Williams said: “Persistently low inflation, heightened uncertainty, and global cross-currents makes this a particularly challenging time for monetary policy, and my laser focus is on doing the best we can to support a strong economy and achieve our 2 percent inflation goal.”

Read the full speech.

This article was originally published by the New York Fed on Medium.

The views expressed in this article are those of the contributing authors and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.


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