The “top three” of the Federal Reserve downplay expectations of interest rate cuts: monetary policy is in a more appropriate position and there is no urgent need for adjustments

The Zhitong Finance App learned that the “top three” of the Federal Reserve and New York Federal Reserve Chairman Williams said that there is currently no urgent need to further adjust interest rate policies, and recently released employment and inflation data have not substantially changed his judgment on the economic situation and monetary policy prospects.

In an interview on Friday, Williams pointed out that the Federal Reserve has previously cut interest rates at three consecutive policy meetings, and these measures have put monetary policy in a more appropriate position. “Personally, I don't think it is urgent to take further monetary policy action now, because the interest rate cuts we have carried out have put the policy position very well in place,” he said. “I would like to see inflation fall back to the target level of 2% without causing excessive damage to the labor market, which in itself is a balance that requires careful trade-offs.”

His statement highlights that after cutting interest rates continuously, the Federal Reserve still faces a high degree of uncertainty about whether and when to continue to cut interest rates. Although officials chose to lower interest rates at the last three interest rate meetings, there are still differences within decision makers in judging inflation trends and employment prospects. According to the latest economic forecast released by the Federal Reserve last week, officials expect only one more rate cut in 2026.

Regarding the employment and inflation data released this week, Williams pointed out that part of the performance was affected by short-term distortions brought about by the recent government shutdown. However, at the same time, he stressed that judging from the longer-term trend, relevant data still shows that potential inflation continues to move towards the Fed's 2% target, while the labor market is also gradually cooling down, which is generally in line with the Fed's expectations for an “orderly slowdown” of the economy.