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January 10, 2024

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

New York Fed President John C. Williams spoke about his economic outlook and monetary policy before a group of real estate and business leaders from across the greater New York metropolitan area on January 10, 2024.

He said:

“The 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.”

“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 percent on a sustained basis.”

“The outlook remains highly uncertain, and I will continue to carefully watch and assess the data to judge whether the stance of policy is best positioned to achieve our goals.”

In his remarks, President Williams said that the Federal Reserve’s work and actions are guided by its dual mandate: to achieve maximum employment and price stability. “When it comes to employment—the first half of the mandate—things are looking very good,” he said. On price stability, he said that “the situation has improved significantly since the sharp rise in inflation that followed the onset of the pandemic and Russia’s invasion of Ukraine.”

President Williams described a strong labor market and a steady return toward balance, noting that there’s been a rebalancing in New York City as well.

He pointed out that inflation, as measured by the personal consumption expenditures (PCE) price index, surged to a 40-year high of about 7 percent in June of 2022, but fell back to just over 2-1/2 percent over the past year and a half. “This decrease is a clearly positive development, but it is important to stress that we still have a ways to go to get inflation back to the FOMC’s longer-run goal of 2 percent,” he added.

He explained that globally traded commodities and core goods excluding food and energy have seen the largest and most rapid improvements, and noted that there has been significant progress on core services inflation, too.

“My base case is that the current restrictive stance of monetary policy will continue to restore balance and bring inflation back to our 2 percent longer-run goal,” he said.

He also noted that the Federal Reserve’s strategy and implementation of the reduction in its securities holdings is working exactly as designed. “Thus far we have reduced our securities holdings by about $1.3 trillion, with no signs of adverse effects on market functioning,” according to President Williams.

Taking into account the effects of restrictive monetary policy, he expects:

  • GDP growth to slow to about 1-1/4 percent this year.
  • The unemployment rate to rise to around 4 percent.
  • PCE inflation to continue to slow to about 2-1/4 percent this year, before reaching the Fed’s 2 percent longer-run goal next year.

Read the full speech.

Julie Lasson is an executive communications specialist at the New York Fed.

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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