Federal Reserve Signals Potential Rate Cuts Amid Economic Shifts

Federal Reserve Bank of New York President John Williams indicated that an improved economic balance could lead to rate cuts. The decision will depend on ongoing economic performance, with a gradual approach suggested. Williams spoke after jobs data release, highlighting inflation trends and future rate projections.

Federal Reserve Bank of New York President John Williams announced that the current economic balance has created an opportunity for rate cuts. He emphasized that the full extent of action will be determined by the economy's performance.

Williams, in a speech at the Council on Foreign Relations in New York, noted that with inflation targeting 2 percent, it is suitable to reduce policy restrictiveness by lowering the federal funds rate. He indicated that monetary policy could shift to a neutral stance over time based on data evolution and economic outlook.

Following the release of August job data, Williams addressed the observed rise in the jobless rate as a sign of cooling from overheated conditions, predicting it to stabilize around 4.25% by year's end before returning to 3.75%. He acknowledged easing inflation pressures and foreshadowed potential rate cuts starting in September, with Fed officials maintaining a cautious, methodical approach.

(With inputs from agencies.)