New York Fed President John Williams and Chicago Fed President Austan Goolsbee have emphasized that the labor market and economic growth remain strong. They also noted that any inflationary effects from tariffs are likely to be temporary. Their comments align with Federal Reserve Chair Jerome Powell, who, during a press conference on Wednesday, reiterated that policymakers decided to hold interest rates steady for the second consecutive meeting.
Speaking at the Macroeconometric Caribbean Conference in Nassau, Bahamas, Williams stated, “There are no indications that inflation expectations have become unanchored compared to pre-pandemic levels.”
Meanwhile, a University of Michigan survey showed that consumer inflation expectations for the next five to ten years have risen for three consecutive months, reaching 3.9%—the highest level in over 30 years. This has sparked concerns among economists and investors that the Trump administration’s trade policies may drive inflation higher, potentially leading the Federal Reserve to maintain elevated interest rates for an extended period.
Although Powell and other Fed officials have largely dismissed the University of Michigan data, they acknowledged the importance of keeping long-term inflation expectations stable. Other indicators of inflation outlook have remained relatively stable.
Some Federal Reserve policymakers believe that the central bank can overlook short-term price increases due to tariffs only if inflation expectations remain firmly anchored.
Williams also pointed out the uncertainty surrounding the economic impact of rapid shifts in immigration, trade, and fiscal policies. However, he expressed confidence that the current monetary policy stance is well-positioned to adapt to evolving economic conditions.
In an interaction with reporters on Friday, Williams highlighted the wide range of possible economic scenarios amid this uncertainty. However, he noted that the Fed’s latest economic projections—showing slower growth and slight upward revisions to inflation and unemployment—appear reasonable.
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