Fed’s Williams: Our work to bring inflation back to 2% is not done

  • Fed’s can cut rates when confident inflation moving to 2%
  • Fed will need restrictive policy stance for some time
  • Outlook still uncertain, rate decision to be made meeting-by-meeting
  • Rare decisions will be driven by totality of data
  • Risks to economy are two sided
  • In 2024 sees GDP at around 1.25%, unemployment at 4%
  • Sees inflation ebbing to 2.25% in 2024, and 2% in 2025
  • Things are looking very good on jobs front
  • Inflation situation has improved quite a bit
  • Fed sees ‘meaningful’ progress in restoring economic balance
  • Balance sheet wind down working as planned
  • Fed not near point where banking sector liquidity is scarce

These comments tilt dovishly, though not explicitly. The “inflation situation has improved quite a bit” is the kind of thing you say before you start hinting at ‘normalizing’ or ‘toggling’ rates back towards neutral.

However there is some focus on the balance sheet comments, which seems to run counter to what Logan said.


“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.”

  • We’re watching both hard and anecdotal data for economic clues
  • Fed must be ready to react to unexpected events
  • Inflation has been coming down pretty quickly
  • 2023 big surprise was the speed of inflation retreat
  • Rate cut prospects tied to how economy performs
  • Not worried inflation will get stuck at a high level

This article was written by Adam Button at www.forexlive.com. Source