New York Fed President John Williams said in a Reuters interview that he’s comfortable with the current interest rate level. He described the current federal funds rate, at 2.25-2.50%, as being “around my view of what neutral interest rates are”. And “monetary policy is where it should be”.
He noted that a shift in economic outlook is needed for Fed to resume the rate hike cycle. Nevertheless, he added “I don’t think that it would take a big change, but it would be a different outlook either for growth or inflation”.
Regarding balance sheet reduction, Williams noted it could end when bank reserves hit “maybe $1 trillion of reserves or somewhat more than that”. That’s only around USD 600B below current levels. He added, the figure is “a guess today of the amount of reserves that will be held in the system in the future – but again we are learning and will get a finer touch on that.”
