New York Fed President John Williams said Thursday that monetary policy is now “modestly restrictive” and appropriate for current conditions, but signaled that rates may eventually be guided back toward neutral if progress continues on inflation and employment. Speaking at the Economic Club of New York, Williams said he sees scope for gradual adjustments if his baseline forecast holds.
Williams projected GDP growth between 1.25% and 1.50% this year, with the unemployment rate edging up from 4.2% currently to 4.5% next year. He noted the job market has cooled, and it’s “clearly the case” that hiring risks are tilted to the downside.
On inflation, Williams said tariffs are clearly pushing prices higher, adding an estimated 1.0% to 1.5% to inflation this year. He forecast PCE inflation to average between 3% and 3.25% in 2025 before falling to 2.5% next year and back to the Fed’s 2% goal in 2027. Speaking to reporters, Williams added that upside risks from tariffs have eased “on the margin,” noting that inflation dynamics remain contained despite ongoing trade disruptions.
Separately, Chicago Fed President Austan Goolsbee struck a more cautious tone, saying he has not yet decided whether a cut is appropriate at the September 16–17 FOMC meeting. he described the gathering as a “live meeting,” adding that Friday’s jobs report and upcoming inflation data will be pivotal to his decision.
