Greg Robb
New York Fed President expects modest growth this year, not recession as Fed staff forecast
According to New York Fed President John Williams on Wednesday, the latest economic data seem to have smashed Federal Reserve policy, with both inflation and the labor market cooling.
In an evening speech to a group of bond market experts known as New York University’s Money Marketers, Williams said the latest data showed “a continuing trend of decelerating inflation.” On the other hand, there are also signs of a “gradual cooling in labor demand.”
If both of these factors continue, they could help keep inflation down.
In his remarks, Williams said he expects inflation, measured by the Personal Consumption Expenditure Index, to ease to about 3.25% this year from 5% in February. Inflation would then drop to 2%, which is the Fed’s long-term target, over the next two years, he said.
Additionally, Williams said he expects the unemployment rate to rise from a tight 3.5% in March to a range of 4% to 4.5% over the next year.
Williams did not comment on the Fed’s next rate committee meeting in early May, other than highlighting the fact that officials said at the last meeting that another rate hike “might be necessary.” No. Financial markets are pricing in a likely rate hike of 25 basis points at the May 2-3 meeting. The Fed has pushed its benchmark interest rate into the 4.75%-5% range for the ninth time in a row since its March 2022 policy meeting.
Some economists believe the Fed will stop as bank credit standards have tightened following the Silicon Valley bank failure. It can lead to a decrease in consumer spending.
“Things are stable in the banking sector,” Williams said.
Credit conditions are likely to tighten somewhat, but “it is still too early to gauge the magnitude and duration of these impacts, and we will continue to closely monitor changes in credit conditions and their potential impact on the economy,” he added. rice field.
Williams said first-quarter data showed the economy continued to expand at a “solid pace.” He said he expects real GDP to grow moderately this year. By contrast, Fed staff are forecasting a recession starting later this year.
Shares closed lower on Wednesday as yields on 10-year government bonds climbed to 3.59%.
-Greg Robb
This content was produced by MarketWatch operated by Dow Jones & Co. MarketWatch is published independently of The Dow Jones Newswires and The Wall Street Journal.
(Closed) Dow Jones Newswire
04-19-23 1907ET
Copyright (c) 2023 Dow Jones & Company, Inc.
