New York Fed President John Williams said in a speech yesterday that monetary policy will need to “move to a more neutral policy setting over time.”

However, he refrained from offering firm guidance on the timing of rate cuts, including whether a December adjustment might be appropriate.

Williams highlighted the uncertainty inherent in economic forecasting, noting that “the path for policy will depend on the data.”

Despite the ambiguity, Williams painted a relatively optimistic picture of the US economy, describing it as in a “good place” with a “strong” labor market.

He projected economic growth of 2.5% or more for the year, with unemployment expected to stabilize between 4% and 4.25% in the coming months. Inflation is anticipated to end the year at 2.25%, with no significant upward pressure from the labor market.

Fed Governor Christopher Waller expressed tentative support for a rate cut at the December FOMC meeting, contingent on upcoming data aligning with expectations for inflation to decline toward the 2% target over the medium term.

While stating that he currently “leans toward supporting a cut,” Waller emphasized that any unexpected data could alter his forecast and influence his decision.

Waller used a vivid analogy, comparing his efforts to combat inflation to an “MMA fighter” with inflation in a “choke hold”. While it keeps “slipping away” at the last minute, he assured that “submission is inevitable” and that inflation isn’t escaping the “octagon.”

Despite slower progress on taming inflation, he highlighted broader economic stability as a factor supporting further monetary easing. Waller argued that, even after a cumulative 75 basis points in cuts, policy would remain restrictive, with additional easing simply reducing the intensity of Fed’s brake on economic activity.

In an essay, Atlanta Fed President Raphael Bostic expressed cautious optimism about the US economy, highlighting that the labor market is cooling in a “largely orderly fashion” despite higher interest rates. “This is welcome news,” Bostic noted, echoing perspectives from business contacts.

Besides, he noted that while there are still upside risks to price stability, the “totality of the data” suggests that progress toward 2% inflation target remains “on track”.

Bostic assessed the broader economy as being “on solid footing,” with the labor market stable near maximum employment and price stability within reach. However, he warned against complacency, noting that the monetary policy outlook is not predetermined.

“In making judgments about what this path should look like, my strategy will be to look to the incoming data,” he said, emphasizing a need for vigilance as policymakers address remaining challenges.

Full essay of Fed’s Bostic here.