JERSEY CITY, New Jersey, Dec 15 (Reuters) – New York Fed President John Williams said on Monday that last week’s interest rate cuts put the Federal Reserve well-positioned to handle future conditions, adding that he believed inflation would slow amid a cooling job market.
“Monetary policy is in a good position heading into 2026,” Williams said at an event hosted by the New Jersey Bankers Association in Jersey City. With the recent easing, the Federal Open Market Committee “has shifted its moderately restrictive monetary policy stance to neutral.”
Williams said the “top priority” was to get inflation back to 2% without “creating undue risks” for the job market. “My assessment is that downside risks to employment have increased while upside risks to inflation have subsided in recent months as the labor market has cooled.”
Williams’ comments were the first public comments since the Fed cut its benchmark overnight interest rate by a quarter percentage point to a range of 3.50%-3.75% on Dec. 10 to balance rising risks in the job market with inflation that remains above its 2% target.
Fed Chairman Jerome Powell told reporters at a post-meeting press conference that there was uncertainty about the outlook for monetary policy, so it was unclear whether the central bank would cut interest rates again at its next meeting in late January.
‘The labor market is clearly cooling’
Williams said he is more optimistic about U.S. economic growth next year as uncertainty eases and inflationary pressures ease. He noted that the impact of tariffs on prices was not as large as he expected, adding that import taxes appeared to have led to a one-time price increase but did not translate into sustained growth in price pressures.
He said the impact of tariffs on price pressures “will be fully felt in 2026,” with inflation falling to 2.5% next year and 2% in 2027.
He also said he expected the unemployment rate to rise to 4.5% this year, but added that based on forecasts for 2.25% growth next year, “I expect the unemployment rate to gradually decline over the next few years.”
“The labor market is clearly cooling, and I should emphasize that this is an ongoing, gradual process with no signs of a sharp increase in layoffs or other signs of rapid deterioration,” Williams said.
The Fed also announced so-called reserve-managed asset purchases at the end of last week’s policy meeting, purchases of Treasury bills to rebuild financial sector liquidity and ensure the central bank has a firm grip on its interest rate target. While the Fed claims the purchases are purely technical, some observers view them as a stimulus measure.
