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Fed’s Williams Says Still ‘a Ways to Go’ to Reach 2% Inflation

(Bloomberg) — Federal Reserve Bank of New York President John Williams said the US central bank still has “a ways to go” in its battle over inflation, but stopped short of offering any new hints on when the Fed will begin cutting interest rates.

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Williams also cited unexpectedly hot data on consumer prices in January as a sign that there will be “bumps along the way” as Fed officials try to guide the inflation rate back to their 2% goal.

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“We still have a ways to go on the journey to sustained 2% inflation,” he said Wednesday in prepared remarks at the Long Island Association Regional Economic Briefing in Garden City, N.Y.

The New York Fed chief said he expects inflation measured by the Fed’s preferred gauge — the personal consumption expenditures price index — to fall to around 2% to 2.25% this year and 2% in 2025. Policymakers will receive fresh data on PCE inflation in January on Thursday.

As recently as mid-January, investors and some economists were betting on the Fed to start lowering interest rates at its March 19-20 meeting. Markets have since significantly dialed back expectations for early and rapid cuts, shifting wagers on the first move to June or July on the heels of reports showing job and price gains well above forecasts last month.

The patient approach by Fed officials has been largely validated by data released in recent weeks. The consumer price index rose by more than forecast in January, and prices paid to US producers also climbed. As a result, economists forecast the Fed’s preferred gauge of underlying inflation rose last month at the fastest pace since early 2023.

In an interview with Axios last week, Williams said it will be appropriate to cut interest rates “likely later this year.” 

He didn’t comment on the outlook for interest rates in his remarks Wednesday, but said he “will be focused on the data, the economic outlook, and the risks, in evaluating the appropriate path for monetary policy that best achieves our goals.”

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