Fed/Williams: I Expect Inflation to Cool Down and Interest Rates to Decrease Further

Forex - New York Fed President John Williams stated that he expects inflation and interest rates to decrease further. In an interview with Barron's, Williams mentioned that a 2% inflation rate is the optimal level for the central bank to balance its employment and price stability targets.

John Williams said, "Economic growth has been very good. At the same time, we have seen a fairly stable cooling in the labor market. We are witnessing inflation steadily declining from very high levels. Last year, PCE inflation was probably around 2.25% — which indicates a significant drop in inflation towards our 2% target. Obviously, we are not quite there yet. The big story here is how to reduce strong growth, a cooling labor market, and inflation simultaneously.

I expect gross domestic product growth to be around 2.5% this year or maybe a little higher. I anticipate the labor market will remain where it is and perhaps cool a bit more. The current unemployment rate is at 4.1% in October. It may reach around 4.25%. I also expect inflation to continue to gradually decline. I expect the inflation rate to be around 2.25% for the entire year."

Williams holds the sole permanent vote among regional bank presidents on the Federal Open Market Committee due to his responsibility for conducting the New York Fed's monetary policy operations.