Federal Reserve Bank of New York President John Williams said the U.S. central bank will likely cut its benchmark lending rate "later this year," adding that he still expects three rate cuts in 2024 is "a reasonable starting point."
"The economy is still strong, we expect to see positive growth and inflation to keep coming down," Williams told reporters Wednesday after an event with the Long Island Association Regional Economic Briefing in Garden City, New York. "So something like three rate cuts is a reasonable starting point when you think about it."
Williams added the pace of rate cuts will depend on economic data, not the calendar, and said rate moves won't need to be timed to meetings at which officials update their quarterly economic forecasts.
The New York Fed chief 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.
"We still have a ways to go on the journey to sustained 2% inflation," he said in his prepared remarks.
During a question-and-answer session following the speech, Williams said Fed officials can think about cutting rates "later this year," echoing remarks he made in a Feb. 23
He said he expects inflation measured by the Fed's preferred gauge — the personal consumption expenditures price index (PCE) — 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.
READ MORE:
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 (CPI) rose by more than forecast in January, and prices paid to U.S. 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.
"I 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," Williams said.
