Fed's Williams says rate policy must be patient, data dependent
(Adds details from speech, background on Fed policy)
By Trevor Hunnicutt
SOMERSET, N.J., Jan 18 (Reuters) - The U.S. Federal Reserve
must be patient and guided by data when considering whether to
raise interest rates, New York Fed President John Williams said
on Friday, in remarks reinforcing the central bank's commitment
to a wait-and-see approach.
Williams said inflation pressures remain mild yet the
economic "tailwinds" that boosted the economy in 2019 "have lost
their gust," including due to an ongoing partial shutdown of the
If those pressures cause the economic outlook to
deteriorate, the Fed could pause rate hikes or adjust the path
of balance sheet normalization, Williams said.
"The approach we need is one of prudence, patience, and good
judgment - the motto of 'data dependence' is more relevant than
ever," he said in remarks prepared for delivery to the New
Jersey Bankers Association.
"If growth continues to come in well above sustainable
levels, somewhat higher interest rates may well be called for at
some point. However, if conditions turn out to be less robust,
then I will adjust my policy views accordingly."
The remarks come as Fed policymakers have signaled a
willingness to wait to deliver more rate hikes until they have a
better handle on whether slowing global growth and financial
market volatility will undercut an otherwise solid U.S. economic
In separate appearances in recent days, policymakers from
across the spectrum of views agreed the central bank should
pause further rate hikes until it is clear how much the U.S.
economy will be held back by larger risks like slowing growth in
China and narrower ones like the ongoing budget stalemate in
Williams said the challenge facing policymakers in recent
years is that inflation has been too low, not too high,
suggesting that rate hikes used to slow price pressures may not
be warranted. Williams said he said expects inflation to be
right at the Fed’s 2 percent target, with no signs the economy
has pressure building in it that would push prices higher
despite a strong labor market and rising wages.
But there is, he said, increasing anxiety in the markets
about economic growth this year. Since October, when signs
emerged that global growth is slowing, financial markets have
grown increasingly skeptical that the Fed can continue
tightening much longer.
The Fed increased interest rates three times in 2017 and
four times last year, pushing them up to 2.25 percent to 2.5
percent at its final 2018 meeting in December. It is signaling
it would probably raise rates two more times this year.
Fed Chair Jerome Powell and other U.S. central bankers who
pushed the rate hikes last year have sought in recent weeks to
project a more flexible approach this year.
(Reporting by Trevor Hunnicutt
Editing by Chizu Nomiyama)
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